Market Volatility in the Middle East: Quick Brief: Week of 6/23
*Editor’s Note as of 6/23: We recognize the gravity of the recent military conflicts and the profound human suffering it has caused. Our thoughts are with all those affected by the current situation.
In light of serious recent events, many clients have reached out regarding the energy market implications. Linked below is a Special Market Update from our global commodity experts, offering timely analysis of the oil market impact.
We also invite you to follow our LinkedIn channel, where our Global Research & Analytics (GR&A) team shares weekly 10-minute video briefings every Monday at 10 AM ET. The following is a quick post-GEO live analysis from our team, the week of 6/23.
Geopolitical Tensions and Energy Markets: What the Latest Events Mean for Oil and Gas
In the latest edition of GEO Live, our team of GR&A analysts focused on the escalating conflict involving Iran, Israel, and the United States, particularly the implications for global energy markets. The discussion zeroed in on how recent military actions—especially strikes on Iranian nuclear sites—are influencing oil and natural gas prices.
Oil Prices React, Then Retreat
Following the weekend's escalation, oil prices initially surged, with WTI crude nearing $78 per barrel. However, markets quickly shed that risk premium, and prices settled slightly lower by Monday. This suggests that traders are not yet pricing in a long-term disruption to oil supply.
The Strait of Hormuz: A Critical Chokepoint
A major concern is the Strait of Hormuz, through which about 20% of the world’s crude oil passes. A blockade could push oil prices well above $100 per barrel. However, experts believe a sustained closure is unlikely due to the immense geopolitical and military challenges it would pose, including potential global backlash and regional instability.
Natural Gas Markets Also at Risk
Qatar, one of the world’s top LNG exporters, relies on the Strait of Hormuz for all its shipments. Any disruption could ripple through global LNG markets, especially in East Asia and Europe, which may face increased competition for cargoes.
Supply Alternatives: OPEC+ and U.S. Shale
Despite the risks, the market remains relatively calm due to the availability of alternative supply sources. OPEC+ has spare capacity exceeding 3 million barrels per day, and U.S. shale producers can ramp up output quickly in response to price signals. These buffers help mitigate fears of a prolonged supply shock.
Conclusion: Risk Remains, But Markets Stay Measured
While the geopolitical situation remains volatile, markets are currently discounting the likelihood of a major, sustained disruption. However, any targeted events on shipping or further escalation could quickly inject volatility back into energy prices.
What’s Next?
For Schneider clients, the ongoing conflict underscores the importance of monitoring geopolitical risks that could impact energy costs and supply chains. Clients relying on oil-dependent operations may face volatility in pricing and potential disruptions in logistics if the situation escalates further.
Our Global Research & Analytics team provides a comprehensive mix of-quantitative and qualitative analysis-that informs Schneider’s forward-market views across: Natural Gas, Electric Power, Crude Oil, and Carbon Markets. This intelligence feeds into many other services across Schneider Electric’s portfolio. Our team looks forward to continuing to provide timely and relevant updates alongside market movements.
For a deeper dive on this special market update, read more here.