Tensions between Israel and Iran have introduced significant volatility to global oil markets, influencing crude oil prices and energy stock performance, as concerns over potential supply disruptions in the Middle East persist.
Recent escalations, including Israeli strikes on Iranian military and nuclear facilities and Iran’s retaliatory missile and drone attacks, have raised fears of interruptions to oil production and exports. Iran, a key oil producer contributing approximately 3.3–3.7 million barrels per day (bpd) to the global supply, accounts for about 3–4% of the world’s oil output. The conflict has also sparked concerns about the Strait of Hormuz, a vital chokepoint through which 20% of global oil (18–19 million bpd) passes, controlled partly by Iran.
Following Israel’s strikes in June 2025, Brent crude surged over 7% to $74.23 per barrel, while West Texas Intermediate (WTI) rose 7.5% to $73.12 per barrel, with intraday spikes reaching 14%. Earlier, in October 2024, Brent climbed 15% above $81 per barrel after Iran’s missile attacks on Israel. However, prices fell on June 16, with Brent dropping to $71.58 and WTI to $70.27, following reports that Iran sought a truce through diplomatic channels in Qatar and Saudi Arabia, easing fears of immediate escalation.
The conflict has directly impacted oil company stocks. Shares of major producers like BP and Shell rose nearly 2% and 1%, respectively, on June 13, 2025, as higher crude prices signaled potential revenue gains. Energy stocks have outperformed broader markets, which saw declines in indices like the S&P 500 (down 1.1%) and Dow Jones (down 1.8%) due to concerns over inflation and economic disruptions from elevated energy costs.
Analysts note that a “risk premium” has been priced into oil markets, with fears of supply disruptions driving volatility. A sustained loss of Iranian oil exports could push Brent prices above $90 per barrel, according to Goldman Sachs, while a closure of the Strait of Hormuz could drive prices to $100–$120 per barrel. However, global supply dynamics, including increased production from the U.S. (the world’s largest oil producer at 22% of global output) and non-OPEC+ countries like Brazil and Canada, alongside OPEC+’s spare capacity of 3.3 million bpd, may mitigate some risks. Strategic reserves held by the International Energy Agency (1.2 billion barrels) and potential releases from the U.S. Strategic Petroleum Reserve could further stabilize prices.
Counteracting these supply concerns, global oil demand remains subdued, particularly in China, and fears of oversupply have kept price increases modest compared to historical Middle East conflicts, such as the 2022 Russia-Ukraine crisis when Brent hit $130 per barrel. The trajectory of oil prices and stocks hinges on the conflict’s progression. A diplomatic resolution could see prices fall back to $60–70 per barrel, while escalation—such as attacks on Iran’s oil infrastructure or regional spillover involving Saudi Arabia or Iran’s proxies—could amplify price surges.
Broader economic implications include potential inflation from higher transportation and production costs, which could push U.S. gasoline prices from $3.13 to as high as $5.13 per gallon in extreme scenarios. This has already weighed on sectors like airlines, with United Airlines and Delta dropping 4.4% and 3.8%, respectively, on June 13.
Market observers continue to monitor developments closely, with diplomatic efforts and regional dynamics likely to shape oil market stability in the coming weeks.