Oil prices dip following Iran's downplay of reported Israeli missile attack

Oil prices fell on Friday after initially surging over $3, as Iran downplayed the impact of reported Israeli attacks.

News agency Reuters reported that Brent futures were down 72 cents, or 0.83%, at $86.39 a barrel by 1314 GMT while WTI crude contracts for May fell 66 cents, or 0.8%, at $82.07 at 1314 GMT.

US news outlet ABC News cited a US official as saying that Israeli missiles had hit a site in Iran.

Iran's Fars news agency said explosions were heard at an airport in the Iranian city of Isafahan but the cause was not immediately known. Several flights were diverted over Iranian airspace, CNN reported.

Earlier, oil prices jumped around $3 a barrel in the global market on Friday in reaction to reports that Israeli missiles had struck a site in Iran, sparking concerns that Middle East oil supply could be disrupted.

The benchmark contracts surged more than $3 then eased slightly. At 0200 GMT, Brent futures were up $2.63, or 3%, to $89.74 a barrel. The most active US West Texas Intermediate contract climbed $2.56, or 3.1%, to $84.66 per barrel.

Last weekend Iran launched hundreds of drones and missiles in a retaliatory strike after a suspected Israeli strike on its embassy compound in Syria. Most of the drones and missiles were downed before reaching Israeli territory, with minimal damage and casualties.

Investors have been closely monitoring Israel's reaction to the April 13 Iranian drone attacks. The geopolitical risk premium in oil prices had been unwinding this week on the perception that any Israeli retaliation to Iran's attack would be moderated by international pressure.

In the global crude oil supply, Venezuela lost a key US license allowing the OPEC member to export oil to markets globally. The US also announced sanctions on Iran, another OPEC member, targeting its unmanned aerial vehicle after the country's drone strike on Israel last weekend.

The sanctions on Iran, however, exclude its oil industry.