Market’s muted response to the Middle East conflict is a sign that things have changed
June 19, 2025
If someone told you Israel and Iran were at war, what would you guess the price of crude oil to be? In the past, the predictions were $100 per barrel, $120, or even $200. I know that energy markets have gone up in the last week, but nothing like we have seen in the past. So far, prices have been up roughly 7%, and in the Gulf War, prices tripled. Where are the calls for $200 oil?
It is interesting that things seem to be a bit different this time around, and part of the reason is the tons of uncertainty surrounding the markets. I also think Iran is seen in a bit of a different light than it has in the past. It wasn’t all that long ago Iran’s production was over 3 million barrels per day, and exports were, over 2 million barrels per day and now exports were 1.8 at last count and are likely down from that level.
What is the difference? Iran is seen as small in the grand scheme of oil producers. They have been reduced substantially as a military threat. The current view is that the global oil markets are well supplied, with OPEC+ saying it is increasing production. All of these factors have limited energy prices so far. That is not to say that some action in the Middle East could not create $120 oil. If the Strait of Hormuz gets shut, that will drive prices higher. At this point, analysts see the blockage of the Strait as relatively unlikely.
Energy markets are up as there is concerns that the US may be getting ready to potentially have some military response for Iran.