Israel launched ground operations in southern Lebanon overnight, aiming to push Hezbollah away from areas near the border. Interestingly, oil prices are down this morning, which is unusual on the first day of such operations

Adding to this, Bibi directly addressed the people of Iran on X yesterday, suggesting that Israel may have further actions planned. However, I currently believe that Israel is effectively managing the situation, reducing the future risk of aggression in the region by strategically targeting the leadership of its key opponents.In plain English, the Ayatollah is scared for his life and the survival of his regime.

If Israeli actions succeed in limiting Iran’s influence, it could also increase the likelihood of Saudi Arabia striking a deal with the West and Israel. 

In this context, a decrease in oil’s risk premium makes sense and we remain short here, so far with good luck.

Chart 1: Risk premium in crude oil muted