Investors remain calm as the Middle East war unfolds

Flags of Israel and Iran in the Middle East

The rise of American shale has transformed oil markets

(Image credit: Getty Images)

published 27 June 2025

Oil shock averted? World leaders and commodity traders have spent the past fortnight on edge as the long-running Iran-Israel conflict turned hot. Matters came to a head at the weekend when the US directly entered the war, bombing three Iranian nuclear facilities with fearsome bunker-buster bombs.

That dramatic escalation gave the lie to the popular notion that Donald Trump is a “chicken” (“Trump Always Chickens Out”, or TACO, as traders say), says Simon Nixon on Substack. In the grand scheme of things, few geopolitical events have a material impact on markets. But those that do – the 1970s oil crisis, or Russia’s 2022 invasion of Ukraine – have had devastating economic effects.

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Brent crude began to sell off “within seven minutes” of the first Iranian strikes in Qatar, say Malcolm Moore, George Steer and Jamie Smyth in the Financial Times. Within two hours, the price had dropped more than 7%. But for all the drama of flying missiles, traders had “correctly concluded that the attacks would reduce, rather than heighten, tensions”. Satellite images showed the US had removed aeroplanes from the air base days earlier. “It is all orchestrated, we know the base is empty,” said Jorge Montepeque of Onyx Capital.

The risk that Iran would actually go through with closing Hormuz may always have been overstated, according to Tom Holland and Tom Miller of Gavekal Research. America would not be the major victim of a closure of Hormuz. These days, most of the oil that flows through the strait heads east to Asia. China sources “around half of its oil imports from the region”. Closing Hormuz would harm Iran’s friends more than its opponents.

Just a few years ago, an Israeli attack on Iran’s nuclear programme was regarded as the ultimate oil-market tail risk, says Javier Blas on Bloomberg. Analysts talked of oil topping its $147-a-barrel all-time high, or even going above $200 a barrel for the first time. Yet the rise of US shale has transformed energy markets. Indeed, for all the “hysteria” about Hormuz, the world now looks to be heading for an oil supply surge. Opec producers have raised production quotas, and the evidence suggests that Iran’s own production will hit “a fresh seven-year high” this month, an amazing achievement given the country has endured two weeks of bombing.

Israel’s prime minister Benjamin Netanyahu has also won a “dazzling, daunting, dangerous victory”, says The Economist. An irate Trump very publicly forced him to halt strikes on Iran on Tuesday, but this nevertheless remains a “moment of triumph”. Israel, a nation of ten million people, has gained “air superiority over much of the Middle East” and subdued its most dangerous enemies in a multi-front war that began on 7 October 2023.

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.