Nervousness has taken hold among the strong hands manipulating oil prices. Early on Monday, following news of the U.S. conflict in Iran, black gold surged nearly 6%, breaking the $80 a barrel mark. Less than 24 hours later, following Iran’s attack on U.S. bases in Qatar and Iraq, the price of Brent crude, the European benchmark, plummeted another 11%. Just hours earlier, the market faced criticism for not reacting to the escalating violence in the Middle East. Now, with volatility skyrocketing and the potential entry of the Emirates into the conflict, it is evident that oil prices are drastically undermining the likelihood of a total war in the region between the Arab world and Israel, backed by Washington. If such a scenario were on the table, crude oil prices would have soared to record levels. Analysts currently believe that yesterday’s drop can be attributed to Iran opting for attacks, which were intercepted in time, rather than shutting the Strait of Hormuz, a move that would be devastating for global trade.
It appears unlikely that prices will climb too high, as the world has “sufficient oil,” according to JP Morgan, given that crude inventories have increased by 240 million barrels since February—50 million from OECD countries, another 75 million from China, with the remainder from other oil-producing countries. Goldman Sachs outlines two possible scenarios: the first could lead oil prices to $90 a barrel if Iranian production drops by 1.75 million barrels per day; the second, a far more inflationary scenario, could drive crude prices up to $110 a barrel if exports passing through the Strait of Hormuz plummeted by 50% for one month, with sustained production remaining 10% below current levels for another 11 months.
The last time Brent surpassed $100 was in July 2022 when the world was still fearing a new COVID strain from China and discussing global economic slowdown. Another consequence considered by Goldman Sachs is that this crisis could also impact natural gas prices. Currently, contracts for August for TTF, the European gas benchmark, are trading around $42/MWh, but could spike to $100, according to analysts. However, that is not their base scenario. “The economic incentives, including for the U.S. and China,” to prevent a “severe and prolonged crisis at the Strait of Hormuz will be very strong,” the report states, as statistics increasingly work against such a resolution.
China is the primary destination for oil tankers crossing the Strait, accounting for 23% of the total; followed by South Korea (12%), India (11%), and Japan (10%). Only 2% of shipments go to the U.S. Market estimates have surged in favor of those believing the strait will close. Where only 32% of the market believed so on Friday, today that number has risen to over half. A 34% probability is assessed for a closure this very week. Experts from the U.S. bank believe that part of the tension is already priced into crude oil, yet they assign a 20% probability to the worst-case scenario—a closure of the Strait of Hormuz and increased involvement of Middle Eastern countries in the conflict, which could see Brent prices soar to between $120 and $130 a barrel.
“Iran’s response must be carefully calibrated to avoid crossing a threshold that provokes a direct response from the U.S.,” given that the country has “many assets at risk, including the island of Jark in the Persian Gulf, a petroleum enclave of just over 25 square kilometers through which 80% of Iran’s crude exports pass.
Stocks Rise Amid War
While the main stock markets in Asia, Europe, and the U.S. momentarily dismiss what is occurring in the Middle East, there are markets that, against all odds, are reaching historical highs. The Israeli stock market is one such example, with its main index, the TA-125, trading at record levels. Among its largest companies are banks that have seen gains of up to 10% in the last five days, such as Mizrahi Tefahot Bank, the third-largest bank in the country, with a market capitalization near €15 billion; followed by Israel Discount Bank and Bank Hapoalim, the leading financial institution in the market. Additionally, the Israeli market hosts American companies like pharmaceutical giant Teva, which fell by 3.4% last week and has seen a 25% drop this year due to tariffs announced by the Trump administration impacting the sector, leading to potential mass layoffs as warned on Monday by Irish Finance Minister Paschal Donohoe.
The lack of reaction from stock markets suggests that investors have learned to navigate the market despite numerous conflicts, and unless the consequences are lasting, stocks no longer overreact. “Such events often lead to mid-term investment opportunities. Analyzing the 17 military conflicts that have occurred over the last 70 years, the S&P 500 has averaged a 9% gain in the subsequent 12 months,” states Banca March.
A key date circled on the investor calendar is July 9. However, U.S. media does not discount that President Trump may want to use July 4, when the U.S. celebrates Independence Day, to announce the outcome of the tariff pause. The uncertainty introduced by the new occupant of the White House since early 2025 has pushed the U.S. market into losses for a good part of the year, a stark contrast to Europe, where stock markets are recording double-digit gains nearing 20%, particularly in the Spanish market.
In seeking refuge, investment has again flowed into gold, which is attempting to consolidate around $3,400 per ounce. In what has been an exceptionally bullish year, the precious metal has surged more than 27% this year.