Since the early hours of June 13, Israel has launched surprise attacks on Iran. In retaliation, Iran has fired multiple rounds of missiles at Israel, with the military conflict between the two sides continuing to escalate.
International crude oil prices surged and then declined in response to the news. On June 13, the front-month Brent crude oil futures rose to a peak of $78.50 per barrel, marking a single-day gain of over 6.88%. On the same day, U.S. WTI crude oil futures climbed to $77.62 per barrel, up more than 6.27%. However, by June 16, oil prices had begun to retreat. At the time of writing, Brent and WTI were trading at approximately $73.83 and $72.56 per barrel, respectively, each down by 0.54% and 0.58%.
Iran is a major global oil producer and exporter, with a production capacity of 3.8 million barrels per day (bpd). In 2024, its average daily output reached 3.257 million bpd, accounting for around 3.2% of global production. In the same year, Iran exported approximately 1.6 million bpd, representing about 3.8% of global oil trade volume.
During the first wave of the conflict, Israel targeted senior Iranian military officials and nuclear facilities. In the second round, Israel shifted its focus to energy infrastructure, including the South Pars Refinery, Fajr Jam Refinery, Kaspas Oil Field, and various storage facilities.
According to Alaric, Israel’s current focus on fuel-related infrastructure may aim to impair Iran’s military mobility. So far, Israel has refrained from striking Iran’s Kharg Island oil terminal in the Persian Gulf—its most critical export facility, through which more than 90% of the country’s crude is shipped.
Alaric believes that U.S. pressure is at play. President Trump does not want the Israel-Iran conflict to drive oil prices significantly higher, which could in turn fuel domestic inflation. This implies that Israel cannot afford to damage Iran’s oil production and export facilities. Currently, average gasoline prices in the U.S. stand at around $3.14 per gallon, which is already considered high for American consumers.
The market has grown accustomed to geopolitical risks, so the shock from the Israel-Iran conflict may not be overly severe. The extent of the risk depends on Iran’s willingness, capacity, and chosen method of retaliation. The greatest concern is whether Iran might attempt to block the world’s most critical oil transit route—the Strait of Hormuz.
Data from energy analytics firm Kpler shows that approximately 14.388 million barrels of oil pass through the Strait of Hormuz daily en route to global markets, accounting for roughly 33% of global seaborne oil trade. Zhang Zeyu noted that Iran holds a strategic position at this chokepoint. If the Strait were to be blocked, it would likely trigger short-term panic in the markets.
Alaric sees the probability of a Strait of Hormuz blockade as low. He argued that such a move would politically and strategically alienate too many countries, making it counterproductive for Iran.
He further explained that oil passing through the Strait supplies key markets in Europe and China. Any disruption would significantly impact global oil trade and prices—not just affecting major consumers like the U.S., but also import-heavy regions like Europe and China. Moreover, even if Iran were inclined to impose a blockade, its naval capabilities are insufficient to enforce one effectively.
“Although the Israel-Iran conflict has escalated, its impact on oil prices should remain relatively contained,” Alaric said. Only if the situation spirals out of control would extreme outcomes become likely, but he considers such scenarios improbable. Key factors to watch include the degree of U.S. involvement—Trump is more permissive of Israel than Biden—and whether Israel ultimately targets the Kharg Island terminal.
If Iran refrains from implementing a severe, substantive disruption to oil supply, Alaric warns that a sharp market correction remains possible.
At present, the global oil market faces sustained oversupply pressure. “Fundamentally, there’s just too much oil,” Alaric noted. OPEC+ is gradually unwinding production cuts, while supplies from the U.S. and South America continue to grow. Global supply is expected to increase by more than 1 million bpd within the year. Even if OPEC+ halts further output hikes, the market would still be oversupplied.
When asked about the Israel-Iran conflict, Alaric pointed out that Iranian exports have increased by more than 1 million bpd in recent years. Even if geopolitical tensions reduce Iran’s output and exports, OPEC+ has sufficient spare capacity to offset the decline. As such, he believes any price support resulting from the conflict will be temporary.
In a report released on June 13, Goldman Sachs continued to assume uninterrupted Middle East oil supplies and unexpectedly strong U.S. shale output. The bank forecast Brent and WTI prices to drop to $59 and $55 per barrel, respectively, in Q4 2025, and to decline further to $56 and $52 per barrel by 2026.