Middle East Conflict Pushes Oil Toward $100
Rising geopolitical tensions are reshaping global oil markets. In this episode of Focus on Fuels, Energy Risk Manager Trevor McClanahan joins Alex Hodes to analyze the market implications of Israel’s attacks on Iranian nuclear and energy infrastructure.
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Key Takeaways:
- Iranian export disruptions could add $5 to crude prices; Hormuz closure would push WTI toward $93
- Diesel leads refined product gains due to distillate-rich Middle Eastern crude and below-average inventories
- Propane prices diverge despite crude rally, pressured by robust production and inventory builds
Escalation Sparks Oil Price Surge
Oil markets responded abruptly to news of Israeli strikes on Iranian nuclear and energy sites, with WTI (benchmark US grade West Texas Intermediate crude oil) rising above long-term technical resistance levels. As McClanahan notes, “the potential for additional attacks” and heightened geopolitical risks added a significant premium to crude prices. While heating oil jumped seven cents in a day, Brent crude pushed toward $76 while WTI surpassed $74.
Trevor emphasizes that “the headline really kinda sparked the market and pushed it above long-term moving averages”.
Supply Disruption Scenarios
The discussion centers on the possible implications for Iranian crude exports and global supply flows. Kharg Island, which accounts for nearly 90% of Iran’s exports—or roughly 1.5 million barrels per day—has become a focal point. If targeted, it could reduce global supply enough to justify a $5 premium in crude prices.
But the market's biggest fear remains a potential closure of the Strait of Hormuz. “That accounts for twenty million barrels per day,” McClanahan states, and a full shutdown could push WTI toward $93 per barrel.
Product Markets React Differently
While crude markets have rallied, the reaction among refined products has been uneven. Diesel markets, in particular, have spiked significantly, reflecting both geopolitical risk and tighter fundamentals. “Global diesel inventories also remain below seasonal norms,” Hodes explains, making the market more sensitive to disruptions.
Propane, however, has been notably subdued. Despite its usual correlation with crude, ample inventories and steady production have suppressed prices. “We jumped over ten million barrels in two weeks' time,” Hodes notes.
Strategic Adaptation and Risk Mitigation
Saudi Arabia's east-west pipeline—expanded to 7 million barrels per day—offers one potential buffer if Hormuz were compromised. The hosts also touched on potential targeting of Saudi facilities and the strategic leverage Iran may seek if backed into a corner.
In closing, the hosts emphasize the importance of monitoring fundamentals as geopolitical risks evolve. While the market appears to be pricing in extreme outcomes, a retracement could occur if tensions cool.
Dive Deeper
Explore the broader implications of tariffs, freight shifts, and trade retaliation on global energy flows in our latest white paper, “Tariffs, Tankers, and Tumbling Prices: The 2025 Oil Market Shake-Up.”
Key insights include:
- Why U.S. propane exporters may lose up to 200 Kbbd in shipments as China cuts imports
- How re-routed crude and NGL cargoes are reshaping global shipping lanes and margins
- Forecasted price pressure on Mont Belvieu propane, with prices expected to fall to $0.60–$0.66/gal
- Revised global demand estimates and ton-mile reductions in tanker and LNG shipping activity
These insights and more are regularly covered in the Petroleum Post, StoneX’s premier research package tailored for energy professionals. Subscribe now to receive:
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---Written by: Andrew Catsimanes, Copywriter
---Experts: Alex Hodes, Director of Energy Market Strategy and Trevor McClanahan, Energy Risk Manager
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