Crude Spike From Israel-Iran War Likely Short-Lived as Supply Adjusts

The June 13th attack on Iran by Israel, and the subsequent retaliatory and follow on strikes, caused an initial 13% spike in the spot West Texas Intermediate (WTI)-basis crude oil price, which is currently at about $74 per barrel (/bbl), an approximate 8% increase over the pre-strike closing price of about $68/bbl on June 12.

Key Highlights
-- The sudden threat of a broad Middle East war has caused the crude oil price to surge 7% to 8% higher and, therefore, should encourage more supply to enter the global marketplace.
-- Thus far, Middle East crude oil production has not been significantly reduced by the Israeli/Iran airstrike exchanges. The extent and duration of the sudden price increase will depend on the variables of the conflict.
-- Eventually, a higher oil price will exacerbate tariff-related headwinds to the global economy and oil demand, so that, assuming the conflict recedes, the war premium will deflate, and the oil price will likely cycle lower.

"There is no change to our previous full-year WTI price forecast of $60/bbl for 2025, 2026, and 2027," says Andrew O'Conor, Senior Vice President, Corporate Ratings. "Although we believe the price uplift caused by the Israeli/Iran conflict will be temporary, it could provide upside to our full-year 2025 WTI price forecast."