Israel's Surprise Strike on Iran Shakes Oil Markets — but Will Rally Continue?

Israel's unexpected airstrikes on Iranian nuclear facilities disturbed global energy markets, pushing oil prices to several-month peaks and raising fears of a broader regional conflict. Analysts warn that the price surge may be short-lived unless the conflict leads to real disruptions in oil exports.

Oil prices jumped sharply after Israel's June 13 attacks, S&P Global Commodity Insights reported. Dated Brent hit a two-month high at $75.19 a barrel, posting its largest one-day gain in almost five years. Platts valued front-month cash Dubai crude at $72.50 a barrel, an increase of 5.7% from the previous day.

Experts, however, warn this surge might not last. "The attack clearly is bullish in the short term for oil prices, but the question is will the exports be disrupted," said Richard Joswick, S&P Global head of near-term oil analysis. He added that price jumps in previous confrontations between Israel and Iran dissipated soon when escalation plateaued and oil supplies remained unscathed.

Iran's Oil Exports Under Watch Amid Rising Risks

Though Iran's energy infrastructure has not yet been harmed, worries are growing regarding potential retaliatory actions that might interfere with crude shipments or regional shipping channels. Iran shipped only a little under 1.5 million barrels per day in May, the Platts OPEC Survey reported. Increasing floating storage volumes also illustrate increasing tensions in the region.

If Iranian exports stop, especially to China, the only major Iranian crude buyer, refiners will be compelled to find substitutes from other Middle Eastern countries or Russia. This could also increase freight prices, tanker insurance, and nip refinery margins—mainly in Asia.

LNG Prices Rise on Israel's Gas Platform Shutdowns

The war's impact has also suspended Israel's Leviathan and Karish gas platforms, which suspended pipeline gas exports to Jordan and Egypt temporarily, amounting to 1.2 billion cubic feet per day.

Laurent Ruseckas, S&P Global Executive Director, said this shutdown is already bullish for LNG prices, with additional demand pressure likely to follow should outages continue. Egypt and Jordan can expect to have to procure 10–12 LNG cargoes per month to replace it, testing the strength of global LNG supply chains.

Strait of Hormuz in the Limelight

S&P Global cautions that the Strait of Hormuz, a strategic chokepoint for 20% of global LNG trade and an important portion of global oil exports, may be a major flashpoint if Iran were to retaliate by threatening commercial shipping.

Though existing Red Sea transit freight rates continue to hold firm, analysts explain that more aggressive conflict may drive rates upwards. Red Sea transit traffic has already been cut by 60% since the latter half of 2023 due to the current disruptions brought about by Houthi attacks.

Market Outlook: Risk Premiums

Although the initial boost, the more sustained influence on oil and gas markets will depend on whether the conflict intensifies into a full-fledged regional war or stays a contained incident.

"Price risk premiums dissipate unless real supply is disrupted," Joswick added. Energy markets are unsettled for the time being, with traders looking very carefully at each new development in the region.

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