Trump’s Airstrikes on Iran Leave Oil Market Braced for Surge

By Alex Longley and Yongchang Chin

LONDON/SINGAPORE
EnergiesNet.com 06 22 2025

Oil traders are preparing for an oil-price surge when trading reopens, with the focus on whether Tehran’s retaliation to US airstrikes will lead to a disruption in crude flows that have been largely unaffected so far.

After a wild week, Brent futures have jumped 11% since Israel attacked its nemesis, but with sharp moves up and down from one day to the next. The rally is expected to restart on Monday, after the US assault dramatically raised the stakes in a region that accounts for a third of global oil output.

Exactly whether any increase can be sustained will depend on Iran’s next moves. So far in the conflict, there’s been little sign of disruption to oil flows from the region, and if anything Iranian exports have risen since Israeli attacks began on June 13. Several traders said that while they expected a price rise at the open, it will take actual disruption to sustain it.

“Now that US has made its move, the ball is in Iran’s court,” said Harry Tchilinguirian, group head of research at Onyx Capital Group. “The course they choose for retaliation will dictate which way prices will go.”

One of traders’ key concerns is about disruption in the Strait of Hormuz. The maritime chokepoint at the mouth of the Persian Gulf is a vital conduit for about a fifth of the world’s oil, not just from Iran, but also key members of the Organization of the Petroleum Exporting Countries.

At one stage last week, it appeared more a question of when than if the US would intervene. That appeared to shift late Thursday, when Trump said he’d mull his decision for two weeks. Then, in the early hours of Sunday, Iranian time, he announced that Fordow, Natanz, and Isfahan were struck, and described a “payload of BOMBS” dropped on Fordow, a key location of uranium enrichment.

Hours later, in a televised address to the nation, the US president said the strikes had “totally obliterated” the trio of targets, while also threatening further military action if Tehran did not make peace with Israel.

“Much depends on how Iran responds in the coming hours and days — but this could set us on a path toward $100 oil, if Iran responds as they have previously threatened to,” said Saul Kavonic, an energy analyst at MST Marquee. “This US attack could see a conflagration of the conflict to include Iran responding by targeting regional American interests that include Gulf oil infrastructure in places such as Iraq, or harassing passage through the Strait of Hormuz.”

The fate of oil matters because it drives fuel prices and inflation — something Trump said he would quell when he was campaigning for office. In times of extreme volatility, shortages of oil have even precipitated recessions.

From frenzied options markets, to soaring freight and diesel pricing, to a radical redrawing of crude’s pivotal forward curve, all of that volatility is expected to intensify in the week ahead.

“The market wants certainty, and this now firmly pushes the US into the Middle East theater,” said Joe DeLaura, global energy strategist at Rabobank and a former trader, adding prices were now expected to rise when oil reopens. “But I think that this means the US Navy will be tasked to keep the Strait open,” he said, adding prices could head into the $80-to-$90 a barrel range.

Exiting Trades

The market was on edge even before Trump’s announcement.

Traders have been exiting futures positions at one of the fastest rates on record — an indication of both the stress that higher levels of volatility is placing on derivatives books, and the unpredictable path ahead.

In total, the number of futures contracts held on the main exchanges plunged by the equivalent of 367 million barrels, or about 7%, since the close on June. 12, the eve of Israel’s attack. Traders and brokers say the higher levels of volatility have made pricing deals harder over the past week.

“Traders and analysts should be viewing the current oil price gyrations in the context of speculative de-risking,” said Ryan Fitzmaurice, senior commodities strategist at Marex Group Plc. “Going forward, market volatility and open interest will be key areas to watch.”

The cost of hiring a ship to carry crude from the Middle East to China has jumped close to 90% since before Israeli attacks began. Earnings for vessels carrying fuels like gasoline and jet fuel have also leaped, as have insurance premiums.

The danger to vessels in the region’s waters was underscored when two oil tankers crashed into each other causing a fiery explosion — though on this occasion, the ship’s owner asserted there was no link to the conflict.

Still, almost 1,000 ships a day are having their GPS signals jammed, creating growing safety risks. The MICA Center, a French liaison between the military and commercial shipping, said the tanker crash was likely “aggravated” by jamming.

The risk to flows from the region, coupled with the sharp increase in shipping costs, has been bolstering demand for crudes from outside of the Persian Gulf.

Pullback Risk

Even if tensions do remain high, there’s precedent from a few years ago for even a meaningful supply disruption to quickly get resolved and for the market to calm down again.

When an attack in 2019 on processing facilities at Abqaiq in Saudi Arabia knocked out 7% of global supply, it took just a few weeks for crude futures to trade lower than before the attacks occurred, as supplies were quickly restored and backfilled.

There are emergency stockpiles across consuming countries that they can turn to if that’s required, something that can shield the industry from any disruption that might emerge.

That’s one reason, coupled with a persistent threat of geopolitical risks that often often haven’t translated into comparable supply disruptions, why traders say didn’t spike more in the run up to Sunday’s attack.

That will now be tested.

“This is the big one,” said John Kilduff, a partner at Again Capital. “The market default on this development is higher. How high depends on Iran’s response — or the realistic prospects of a meaningful response, which may not be there.”

— With assistance from Stephen Stapczynski, Julia Fanzeres, and Mia Gindis

bloomberg.com 06 22 2025