Introduction
In June, geopolitical tensions escalated in the Middle East, directly affecting oil prices. The conflict began with Israel’s attack on Iranian nuclear facilities, causing West Texas Intermediate (WTI) to rise from $63 to $73 per barrel, and Brent crude from $67 to $74. Iran’s response further increased tensions, keeping prices around $75 and $76.
US Intervention and Iranian Response
On June 22, the United States directly intervened with airstrikes on Iranian nuclear infrastructure. The following day, Iran launched missiles towards a US base in Qatar, causing minimal damage. As the conflict cooled down with Donald Trump’s peace proclamations and threats of sanctions, the geopolitical risk dissipated, leading to a sharp correction in crude prices. WTI fell from $73 to $68, and Brent dropped from $74 to $69 per barrel, erasing up to 10% of their value in a single day.
Impact on Oil Market
Much of these price fluctuations were attributed to Iran’s threats regarding a potential closure of the Strait of Hormuz, through which around 20% of global oil passes. Any disruption in this strategic area could immediately impact 10-15% of the world’s crude supply.
- During the conflict, signs of tension were observed, including evasive maneuvers by ships, congestion in cargo corridors, high freight costs, and skyrocketing insurance premiums for oil tankers traversing the region.
- Once stability in maritime traffic was confirmed, with no new attacks reported, shipping rates plummeted 17% in a single day. This logistical normalization accelerated the crude price correction, eliminating most of the geopolitical premium accumulated during the conflict.
Market Focus on Fundamentals
With immediate risk dissipated, the market has shifted its focus to fundamental factors.
- Despite recent tensions, Iranian crude exports to China remain active and represent effective global market supply, even if not through formal channels.
- Expectations of oversupply towards the second half of the year are growing, as US inventories have been decreasing for five consecutive weeks and nearing seasonal lows not seen in over a decade. The market anticipates potential production increases from OPEC+.
- Russia has already signaled its willingness to support an additional upward adjustment in the July 6 meeting, should the alliance decide so.
- This potential shift in supply policy occurs amidst a global demand environment showing signs of weakness, with the summer seasonal uptick likely acting only as temporary support before the crude oversupply becomes more apparent.
Stability of Major Oil Companies
The most intriguing aspect of this episode was not the crude’s behavior but the resilience of major international oil companies.
- While oil prices fluctuated wildly, the stocks of companies like ExxonMobil, Chevron, Shell, TotalEnergies, and BP remained relatively stable.
- There were no speculative rallies or abrupt crashes. These companies are deeply diversified, vertically integrated, with global operations across all links of the oil chain—from exploration to distribution—and solid balances that enable them to withstand short-term shocks.
- From an investment perspective, this behavior clearly indicates that integrated oil companies are not speculative bets but resilient wealth carriers.
- In times of high geopolitical uncertainty, they act more as a safe haven than risky assets. Their cash flow generation capability, even in moderate price scenarios, makes them a long-term defensive option.
Conclusion
The recent escalation between Israel, Iran, and the United States demonstrated that oil prices are sensitive to political volatility but also that the market can quickly adjust its focus when disruption fails to materialize.
Moreover, it confirmed that fundamentals still dictate the market: oversupply, contained demand, and OPEC+’s direction for the second half of the year.
Amidst all this, major publicly traded oil companies maintained their value, reinforcing their role as reliable investment instruments in an uncertain global environment.
