Oil prices are in chaos amid the conflict between Iran and Israel
18 June 2025 09:33
Oil prices continue to react somewhat chaotically to the conflict between Iran and Israel, "Komersant Ukrainian" reports citing Reuters.
Current situation on the markets
According to OilPrice.com, as of 8:39 a.m. Kyiv time, Brent crude oil futures were down 44 cents, or 0.58%, to $76.01 per barrel. Futures for West Texas Intermediate crude oil fell 37 cents, or 0.49%, to $74.47 per barrel.
At the same time, the previous session closed with a 4% increase, and in general, Brent crude oil prices have risen by about $10 per barrel over the past two weeks.
Another indication of market nervousness was that the premium of Brent crude to the Middle East benchmark Dubai rose sharply by more than $3 per barrel on Wednesday, according to market sources, reaching its highest level since late September 2023.
US military presence in the Middle East
The U.S. military is deploying additional fighter jets to the region to bolster its forces, three officials said on Tuesday. This decision underscores the seriousness of the situation and the US readiness for a possible escalation of the conflict.
US President Donald Trump on Tuesday called for Iran’s “unconditional surrender”.
However, as can be seen from the trading, the US military presence in the region does not necessarily mean a red flag for the market.
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Concerns about oil supplies
Analysts noted that the market is largely concerned about possible disruptions to supplies through the Strait of Hormuz, which carries a fifth of the world’s maritime oil transportation. This strategically important waterway is critical to global energy supply.
Iran is the third largest oil producer in OPEC, producing approximately 3.3 million barrels per day of crude oil. However, the reserve capacity among the producers of the Organization of the Petroleum Exporting Countries and their allies can easily cover this volume.
Analysts’ forecasts
“A significant disruption of Iran’s production or export infrastructure would add more pressure to the price increase. However, even in the unlikely event that all Iranian exports were lost, they could be replaced by OPEC’s reserve capacity… about 5.7 million barrels per day,”
– fitch analysts said in a client note.
Fitch analysts expect the geopolitical risk premium in Brent oil prices to be limited to around $5-10.
The markets are also looking ahead to the second day of the US Federal Reserve’s deliberations on Wednesday, during which the central bank is expected to leave its benchmark overnight interest rate in the range of 4.25%-4.50%.
However, the conflict in the Middle East and the risk of a slowdown in global growth could push the Fed to potentially cut rates by 25 basis points in July, ahead of current market expectations for September, said Tony Sycamore, market analyst at IG.
“The situation in the Middle East could be a catalyst for the Fed to sound more dovish, as it did after the Hamas attack on October 7, 2023,” he said,
– sycamore said.
Lower interest rates usually stimulate economic growth and oil demand.
Inflation risks
However, the Fed’s decision is complicated by the fact that the Middle East conflict is also creating a new source of inflation due to the sharp rise in oil prices. This creates a difficult dilemma for the US central bank between the need to support economic growth and control inflation.
Overall, the situation remains tense, and markets continue to closely monitor developments in the region, as any further escalation could have a significant impact on global energy markets and the economy as a whole.
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