Oil price stays steady as tensions in Middle East boils over

(Image credit: Getty Images)

published 20 June 2025

“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.

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Geopolitical drama aside, oil markets show every sign of being oversupplied. Global inventories have been running “above seasonal norms” for months. The latest spike may just enable US shale producers to keep pumping profitably at levels that would otherwise not have been possible. Indeed, the global oil market is forecast to remain “well supplied through the end of the decade”, according to International Energy Agency forecasts, reports Giulia Petroni in The Wall Street Journal. Global demand for oil is forecast to rise to a plateau of 105.5 million barrels per day (mbpd) in the coming years, but supply is likely to increase even more to 114.7 mbpd over the same period.

Cooling appetite for oil has much to do with China, says Hans van Leeuwen in The Telegraph. Total demand for oil in the Middle Kingdom is forecast to dip from 18.1 mbpd last year to 16.7 mbpd come 2030 due to mass adoption of electric vehicles (EVs). Chinese motorists purchased two in every three EVs sold globally in 2024. Meanwhile, for British motorists, “every $10 increase in oil adds 7p at the petrol pump”, David Oxley of Capital Economics tells Szu Ping Chan in the same paper. Still, the UK economy is much less dependent on cheap oil for economic growth than it used to be.

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.