Oil price stays steady as tensions in Middle East boils over

“Global oil markets have just become a lot more flammable,” says The Economist. On 13 June, two years of heightened Middle East tension finally boiled over into a full-scale Iran-Israel war. With Iran on the ropes, there is a growing risk that its leadership will resort to “desperate measures”. Tehran might close the Strait of Hormuz, the narrow channel through which 30% of global seaborne crude and 20% of liquid natural gas is conveyed. Worse, many of the Gulf’s largest oil-production sites are within range of Iranian missiles. Such retaliation could send prices soaring above $120 a barrel, according to estimates by bank JPMorgan Chase.

Oil prices surged as much as 12% following the first Israeli air strikes to trade at around $72 a barrel this week. All told, that is a fairly measured reaction, says Henry Allen of Deutsche Bank. Brent crude is still well off its 2024 average level of $80 a barrel. Two brief episodes of Iran-Israel exchanges last year have numbed commodity traders to geopolitical risk.