The conflict between Israel and Iran – What is the expected impact on the price of crude oil?
Why this conflict matters to oil markets
For the first time in decades, Israel and Iran are trading direct, sustained attacks: Israeli air and cyber strikes are hitting Iranian nuclear, military and crucially energy sites, while Iran has launched missiles at Israeli cities and infrastructure. The escalation has jolted traders because the two countries sit on opposite ends of the world’s most important energy chokepoint, the Strait of Hormuz, through which roughly 17 million barrels per day (bpd) about a fifth of global supply sail every day.
What has happened to prices so far?
- Initial spike (13 June): Brent futures rallied more than 7 % in a single session after Israel’s first wave of strikes on Iranian nuclear and oil facilities.
- Swingy week (14 16 June): Reports that Tehran might seek outside help to broker a cease fire knocked Brent back by about US $1/bbl, underscoring how headline driven and two way the market has become.
- Fresh gains (17 June): With fighting intensifying and tankers reporting GPS jamming near Hormuz, Brent and WTI jumped another 3 % in New York trading.
Prices are now hovering in the mid US $80s, still below the 2022 highs but well above the US $70–75 range OPEC+ has tried to defend since late 2024.
How supply could be disrupted
| Supply channel | Risk level | Reason for concern | Mitigants |
| Iranian exports (≈1.5 m bpd, mostly to China) | High | Storage tanks at Shahran depot already hit; more strikes could slash output or damage loading jetties. | China’s refiners hold 60–90 days of inventory; some Iranian barrels can move by pipeline via Iraq. |
| Strait of Hormuz (17 m bpd) | Medium high | IRGC has rehearsed speed boat swarms and drone mining; electronic interference reports are rising. | US, UK, and Gulf navies maintain a constant presence; Saudi east west pipelines (≈5 m bpd) bypass the strait. |
| Israeli production (< 0.3 m bpd, mostly offshore gas condensate) | Low | Small share of global liquids; rigs are hardened; export routes don’t cross Hormuz. | Loss could raise regional LNG prices more than crude. |
What OPEC+ and big producers are signalling
Russia’s energy Czar Alexander Novak said the “market needs more barrels” and OPEC+ stands ready to “adjust agreements” if the conflict tightens supply. Saudi officials, meanwhile, have hinted they could accelerate the phased unwinding of last year’s voluntary cuts if prices spike toward $100 and threaten demand.
Historical playbook
| Crisis | Immediate price move | Net disruption (m bpd) | Δ Brent three months later |
| 2019 Abqaiq attack | +15 % intraday | 5.7 | +7 % |
| 2020 US–Iran brinkmanship | +5 % intraday | <0.5 | flat |
| 2022 Ukraine invasion | +11 % intraday | 0.4 (Urals) | +21 % |
| 2025 Israel–Iran (so far) | +7 % intraday | 0.2 (Iranian exports delayed) | +3 % (two weeks in) |
History suggests that unless physical barrels actually disappear for weeks not just might disappear, price spikes fade quickly. But each conflict has its own geometry; Hormuz is a bigger single point of failure than Abqaiq ever was.
Price outlook: three scenarios
| Scenario (90 day horizon) | Probability | Brent range | Key triggers |
| Managed escalation – skirmishes continue but Hormuz stays open; Israel confines strikes to inland targets; diplomacy inches forward. | 50 % | US $78–92 | OPEC adds ~1 m bpd; SPR remains idle; global growth slows slightly. |
| Supply shock – Iran blocks or seriously disrupts Hormuz for > 1 week; Saudi pipes hit capacity; insurers flee Gulf routes. | 30 % | US $100–120 | NATO naval escorts prove insufficient; Asian buyers scramble for Atlantic barrels; strategic stocks released. |
| Rapid détente – cease fire within a month; talks revive the 2024 nuclear framework; sanctions relief dangled. | 20 % | US $70–80 | Tehran scales back proxies; Washington offers limited sanctions waiver; speculators unwind length. |
Broader market and policy ripple effects
- Inflation: Every US $10 jump in Brent adds roughly 0.2 percentage points to headline CPI in energy importing economies, pressuring central banks that were leaning toward rate cuts.
- Shipping and insurance: War risk premia for VLCCs loading at Ras Tanura have already doubled since 13 June; a Hormuz closure could triple freight costs overnight.
- Fuel subsidies: Large importers such as India, Indonesia, and South Africa may face higher subsidy bills or pump price hikes just as voters grapple with food inflation.
- Clean energy narrative: Higher fossil fuel volatility historically boosts investment cases for renewables, but rising interest rates could blunt that effect.
What to watch next
- Strait traffic data: Satellite AIS gaps or a spike in “dark” tankers could signal mounting risks.
- Iranian retaliatory toolbox: Cyber attacks on Gulf producers’ export terminals or drones targeting empty supertankers are lower cost escalations than closing Hormuz.
- OPEC+ emergency meetings: The faster they call one and the larger any output hike, the firmer the ceiling on prices.
- White House/IEA rhetoric: Language about “all tools, including strategic reserves” tends to cap rallies even before barrels hit the market.
- Refiner margins: If crack spreads stay wide, end users feel pain even without an outright crude shortage.
Bottom line
Oil’s biggest enemy is uncertainty. The Israel Iran shooting war injects a tail risk premium into every barrel uplifted in the Gulf, but the actual physical disruption is so far modest. Expect volatile, headline driven trading between the upper US $70s and low US $90s unless the Strait of Hormuz itself is disabled or a diplomatic breakthrough suddenly emerges. For businesses, that means stress testing budgets at triple digit prices, securing flexible supply contracts, and keeping an eye on central banks’ next moves.
