On Saturday night the Israel-Iran conflict, and its domino effect on the world's energy markets, took another twist after the US bombed Iranian nuclear facilities. The Americans dropped 14 “bunker buster” bombs against three nuclear facilities in Iran - Fordo, Natanz and Isfahan. The move came just over a week on from Israel's own campaign of attacks on Iran's nuclear and military targets began. Inevitably, Iran responded with retaliatory missile strikes of its own on Israel.
But the latest escalation by the US takes the oil market into uncharted waters (or straits shall we say). Early on in Israel's campaign, many assumed Iran's oil and gas infrastructure would not be attacked. However, that myth was shattered after Israel attacked Shahran Oil Terminal in Tehran, and two natural gas fields that Iran shares with Qatar.
It hinted at the possibility that the Israelis were in no mood to compromise. Thereafter, oil futures capped the $75 mark, and lurked some 20% above last month's levels using Brent as a benchmark.
Unsurprisingly, old market chatter that Iran would somehow close or attempt to close the Strait of Hormuz has resurfaced, as yours truly discussed in an interview with Germany's ARD Radio 1 on Tuesday while out in the Middle East.
The Oilholic also discussed the direction of the market with Turkiye's Anadolu News Agency noting that if the crisis persists and / or worsens, crude price points will have to recalibrate to a new normal around $80 per barrel Brent prices. However, if tensions or the conflict are quickly diffused, we could see a drop to $70 or below, as and when more normalized market fundamentals kick in once again.
The Oilholic also subsequently said in a BBC interview on Friday that the very fact we happen to be discussing oil breaching a $80 ceiling and not a $100 one is because the market remains well supplied ahead of the US summer driving season. It's also a perception helped in no small part by the Saudis via OPEC+ and a decision by the producers' group to raise production for three successive months.
It's why the market has priced in a heightened level of near-term hostilities between Israel and Iran in as balanced a way as possible, without succumbing to unfounded conjecture or worse still an actual push toward $100 driven by paper bulls - especially now that chatter about Tehran blockading the Strait of Hormuz is all the rage again.
So, here's yours truly's take via Forbes on why its something the Iranians have threatened to do since the 1980s, but have in actual fact never done or attempted even once, and remains a highly unlikely prospect despite any chatter of any sort.
However, Iran-backed Houthi Rebels could make life difficult for energy shipping by resuming their attacks in the other strait - i.e. the Bab al-Mandab Strait on the Red Sea/Gulf of Aden.
Of course, the Israel-Iran story still has some way to go. But the presence of a lot of non-OPEC oil is keeping somewhat of a lid on things. It's why in the small hours of the morning in Europe, and early morning trading in Asia on Monday, gains in the wake of the attack still remain muted at sub-$80 Brent crude prices. (02:00am BST)
Well that's all for the moment folks! More musings to follow soon. Keep reading, keep it here, keep it 'crude'!
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© Gaurav Sharma 2025. Photo I: Oil production site. © Monika Wrangel / Pixabay, May 2015. Photo II: Energy Analyst Gaurav Sharma on BBC News channel. © BBC, June 2025.
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