What Is an Oracle Attack and How Does It Combine with Reentrancy in Derivatives?

An oracle attack involves manipulating the price feed provided by a decentralized oracle. When combined with reentrancy, a malicious actor could exploit a vulnerable derivatives contract's settlement or liquidation function.

The attacker could re-enter the contract to execute multiple trades or withdrawals based on a temporarily manipulated, favorable price before the contract's state is fully updated or the price feed is corrected.