Oil price outlook: Israel is in three-eyes-for-an-eye mode.

Following Tehran’s barrage of missiles on Israel earlier this week in retaliation for the killing of Hezbollah leader Hassan Nasrallah in an Israeli airstrike in Lebanon, expectations are high that Iran’s oil sector could be targeted further.

As a result, the price of Brent crude rose 8% in the past week, reaching $78.05 a barrel on Friday. But that is well below the peak of more than $120 a barrel in early 2022 after Russia invaded Ukraine, as well as the peak of $94 reached after Hamas attacked Israel a year ago.

Bob McNally, founder of Rapidan Energy Group and a former energy adviser to President George W. Bush, said oil markets will not take notice until physical supplies are disconnected.

“It’s the ‘boy who cried wolf’ and they’re tired of it and I think they hope and expect that Israel will be restrained in its response and that we won’t see a material disruption in energy production and flows. ,” he told CNBC on Wednesday.

But the spate of airstrikes launched by Israel last weekend on Houthi targets in Yemen, from where repeated attacks on Israel have taken place, could be an indicator that it will in fact show such restraint.

“Israel is in three-eyes-for-one-eye mode here,” he added.

However, McNally expects Israel to first strike air defenses, ammunition supplies or command and control centers. Such targets could help soften the battlespace if Israel chooses to strike Iran again in a future attack, he explained.

But striking Iran’s nuclear complex or major oil facilities would trigger a regional war and send oil prices soaring, he warned.

“I’ll be a little surprised if they throw that big of a punch here in the first retaliation package,” McNally said.

A key part of Iran’s oil infrastructure is Kharg Island, which handles 90 percent of the country’s crude exports, according to Helima Croft, head of commodity strategy at RBC Capital Markets.

If Israel reaches the facility, then Brent crude could likely rise above $90 a barrel, she told CNBC on Friday, as a strike at such a major terminal could affect exports of 1.7 million barrels a day .

Fearing a potential attack, empty tankers approaching Kharg Island to fill up earlier this week instead turned around and fled, according to TankerTrackers.com.

Alternatively, Israel could hit an oil refinery, which would have less of an effect on global crude supplies than an export hub, Croft said.

For its part, Tehran has warned that it could attack Israel’s energy infrastructure, such as power plants, refineries and natural gas fields. But a blockade of the Strait of Hormuz, which is considered the world’s most important choke point, is seen as less likely as it would also affect Iran’s oil shipments.

“The risk is that this will no longer be a limited conflict between Israel and Iran. Now there’s a wide arc of uncertainty,” said energy guru Daniel Yergin, who is vice president of S&P Global. Financial Times. “It could be breasts for tattoos. The danger is breasts and tattoos could get much bigger.”