- 24
- June
- 2025
With the risk of a broader Middle East conflict subsiding, pressure on oil markets has eased. Oil prices plunged after Iran launched a limited strike on a US base in Qatar, followed by a surprise ceasefire between Tehran and Tel Aviv brokered by Donald Trump.
From Cold Sweats to Cooling Oil: Why Crude Prices Are Plunging After the Iran-Israel De-Escalation
A bomb can send oil prices soaring – unless it doesn’t hit as hard as expected. That’s exactly what played out in the markets following Iran’s limited strike on a United States base in Qatar, followed by a surprise ceasefire between Tehran and Tel Aviv, brokered by Donald Trump.
The reaction was swift: Brent fell 5.02% to $67.89 and WTI dropped 5.21% to $64.94 – all in a single morning.
The sell-off deepened Tuesday afternoon. By 3:40 PM GMT, Brent had dropped 4.79% from its earlier Tuesday high to $68.05, while WTI was down 4.71% to $65.28. The slide gathered pace after Trump signaled a shift in US policy, stating that China could now “continue buying oil from Iran.”
By Monday, the market had already eased, noting that despite initial threats, Iran had not blocked the Strait of Hormuz, a vital passage for 20% of the world’s oil supply. A cautious, almost symbolic strike was enough to reassure investors.
What’s Driving the Price Drop?
The conflict remains limited, with Tehran’s strike on a US base causing no significant damage. Pipelines remain operational, tankers navigate freely and the Strait of Hormuz stays open. The worst-case scenarios markets feared never materialized. Consequently, the “war premium” – the geopolitical risk premium – has dissipated.
Moreover, with high inventories, US shale overproduction and OPEC+ reserves, global supply remains abundant – even in times of tension. Demand, meanwhile, remains subdued, constrained by global economic uncertainty, trade disputes and high interest rates. In short, even in the absence of war, the battle over the barrel remains subdued..
Stock Markets Rally
This geopolitical easing sparked a strong rebound in equity markets. In Europe, Paris gained 1.04%, Frankfurt 1.60% and Milan 1.63%, while London held steady (+0.01%). On Wall Street, as of 3:40 PM GMT, the Dow Jones rose 0.99%, the Nasdaq 1.40% and the S&P 500 0.98%.
However, falling oil prices weighed heavily on energy stocks: TotalEnergies dropped 3.28% in Paris, BP fell 4.75% in London, Shell declined 3.61%, Eni lost 2.54% in Milan, ExxonMobil slipped 1.92% and Chevron fell 1.40% on Wall Street. European natural gas also plunged 12.56% to €35.43 per MWh.
What About Gold?
Gold, typically regarded as a safe haven in times of tension, has lost some of its appeal, falling 1.55% to $3,316 per ounce. The reason is straightforward: perceived risk is diminishing. Less panic translates into less demand for the yellow metal. Even the dollar wavered, losing ground against the euro and the yen. It reached its lowest level against the euro since October 2021, falling 0.35% to $1.1623 per euro.
Jerome Powell, the Chairman of the US Federal Reserve, hinted that interest rate cuts could occur as early as July, while also acknowledging the possibility of a more cautious approach. This uncertainty fuels hopes for an imminent easing of US monetary policy.
The drop in oil prices is not coincidental but the outcome of a combination of factors: a limited attack, an unexpected ceasefire, an abundant supply and demand remaining subdued.
In short, the barrel’s pressure has eased – which is welcome news for the markets, but certainly less so for producers.
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