Oil prices experienced a slight pullback this week following their most significant weekly gains in over a year. Brent crude futures and West Texas Intermediate (WTI) crude futures both declined by a small margin, retreating from the previous week's highs.

The recent surge in oil prices was primarily driven by concerns over escalating tensions in the Middle East. The attack on Israel by Iran prompted fears of potential retaliation against Iran's oil infrastructure. However, as Israel's response remains uncertain, some investors chose to sell off their futures positions to secure profits from the recent price increase.

Despite the temporary dip, oil markets are expected to remain under upward pressure due to the ongoing geopolitical risks in the region. Israel's attacks on Hezbollah targets in Lebanon and the Gaza Strip, coupled with Hezbollah's retaliation, have heightened tensions and raised concerns about potential disruptions to oil supply.

However, analysts caution that a direct attack on Iran's oil facilities remains unlikely, and the overall impact on oil supply from the conflict may be limited. In recent years, geopolitical events have had a less significant impact on oil markets, and OPEC's ample spare capacity provides a buffer against supply disruptions.

While OPEC+ has been cutting production to support prices, the group's ability to offset any potential loss of Iranian oil supply remains to be seen. If Iran retaliates against Gulf neighbors' facilities, OPEC+ may face challenges in maintaining its current output policy. Additionally, the uncertain economic recovery in China could limit further price increases.