After jumping to a five-month high, the price of crude oil slumped on June 24 to pre- Iran-Israel conflict levels, trading around $65-66 per barrel on the countries' decision to de-escalate. The price spike was on the back of the possibility that Iran would shut the Strait of Hormuz—a chokepoint through which 20 percent of global oil supply passes through—but even at peak escalation, he price was still not seen as exorbitant.
Experts believe the oil market, which is well-supplied in a low-demand environment, requires more than rhetoric and threats, and looks for real impact on supplies for a reaction.
So even after the surge, Brent crude only briefly touched highs of around $78–80 per barrel during the conflict with tensions soaring as the US bombed key Iranian facilities, before falling more than 7 percent on June 24.
This is in sharp contrast to the market’s previous reactions including the 2024 Iran-Israel conflict and the outbreak of the Russia-Ukraine war, when prices shot up to highs of $90 per barrel and $120 a barrel, respectively.
Empty threats to block shipping lines
Though alarming, Iran’s threats of blocking the Strait of Hormuz had no serious repercussions to the oil market. The oil supply was undisrupted during the 12-day war between Israel and Iran, which began on June 13, with an impact only seen on freight and insurance costs for shipments passing the Strait of Hormuz.
“The expectation was always that even with the conflict, the Strait of Hormuz would not actually be closed. Not just because Iran would not do it, but because the US and Israel navies were good enough to thwart any attempts to block it. Secondly, Iran’s biggest ally, which is China, is also not in favour of shipments being disrupted, because they also import a large quantity of crude from the region,” said an oil analyst, on condition of anonymity.
Acting on its threat of blocking the Strait of Hormuz would also have been a big hit to Tehran’s economy as the country's exports to China—which consumes almost 80 percent of Iranian oil—would have been hit. Amid the conflict, media reports indicated that oil shipments through the route were never under serious attacks.
Also read: Trump warns Israel after it vows 'powerful strikes' on Iran: 'Do not drop those bombs'
“Despite high geopolitical risk, crude flows from the Middle East Gulf—including through the Strait of Hormuz—continued uninterrupted. Tanker traffic was stable, and no physical attacks affected production or export terminals. Because physical supply was unaffected, the market saw no reason to build a lasting risk premium into prices. Today’s oil traders respond less to headlines and more to real barrels being at risk,” said Sumit Ritolia, senior analyst at Kpler, a shipping-focused data analytics firm.
The Strait of Hormuz, described as the most important chokepoint, is a narrow albeit strategic trade route that connects the Persian Gulf with the Gulf of Oman, extending onward to the Arabian Sea. The strait is only 33 km wide at its narrowest point and is the only sea passage from the Persian Gulf to the ocean.
About 20 percent or one-fifth of the total global oil output passes through the strait, linking major crude producers in the Middle East with key markets worldwide, especially Asia. It is also the route for around a quarter of the global LNG trade.
Well-supplied market
For the oil market currently, the laws of supply and demand override geopolitical tensions. With the Organisation of Petroleum Exporting Countries (OPEC)—which accounts for around 40 percent of total global oil production—deciding to ramp up output despite muted global demand, crude oil prices have softened and have been hovering in the range of $65-70 per barrel in 2025. This compares to average crude oil prices in the range of $75-80 a barrel in 2024.
Surprising the global market, OPEC decided to unwind its announced 2.2 million barrels per day of production cuts on a monthly basis, beginning April 2025. Oil prices had slumped to $60 per barrel in April on the news, before recovering to hover below $70. The cartel had implemented the cuts in 2022 to support oil prices.
The gradual reversal of production cuts has resulted in a well-supplied oil market.
“Unlike in previous crises, global oil supply is currently robust. OPEC+ (as the grouping including non-member oil-producing countries is termed) holds significant spare capacity, and producers like the US, Brazil and Canada continue to increase output. Russian barrels are still reaching buyers, including India and China, despite sanctions. In short, there’s no immediate concern about a shortage of oil in the global market. This oversupply buffer dampens the market’s reaction to geopolitical events,” said Kpler.
Global oil demand, on the other hand, is muted at present. The main reason for this is dampened demand from China, the world's biggest oil importer, due to a slowdown in that country’s economy.
“The data that has been thrown up recently, where CY25 and CY26 demand growth estimates have consistently seen downgrades in the last few months, that is probably playing a role in pessimism around oil prices,” said the analyst who asked not to be identified.
According to a recent International Energy Agency report, global oil demand is projected to slow from 990,000 barrels per day (bpd) in the first quarter of 2025 to 650,000 bpd for the remainder of the year as economic headwinds and record electric vehicle sales curb use.
Also read: Will Iran-Israel ceasefire hold? Where is Tehran's uranium stockpile? Questions loom
Wiser, resilient market
Experts also opine that traders now price in geopolitical risk only if there is a clear, material impact on supply, avoiding disproportionate responses to such conflicts.
“People have stopped over-reacting to (such conflicts). If (US President Donald) Trump is doing something, it might end in a positive way because he wants the oil prices to remain low. The larger community which trades (in oil) has understood this,” said Harshraj Aggarwal, analyst at Yes Securities.
One of Trump's biggest campaign promises was to significantly bring down energy bills for Americans. He has been putting pressure on OPEC to ramp up supplies, while also urging domestic producers to boost output, in order to lower oil prices.
Ritolia said this conflict has shown that the oil market today is more resilient and less reactive than in the past. Unless there’s a visible, material loss of supply, prices are unlikely to spike dramatically, he added.
“Strong global supply, steady exports and evolving market behaviour all contribute to this new dynamic. While risks remain, traders are now demanding more than just tension—they need real impact before they price in fear,” said Ritolia.
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