Oil prices surged around 13% on June 13 after Israel launched airstrikes against Iran stoking fears of a full-blown war in the Middle-East, home to much of the world’s oil supply.
Brent crude surged 13% to an intraday high of $78.50, its highest level since January 27. Meanwhile, US West Texas Intermediate (WTI) crude surged over 12% to a high of $77.58. The rally also marked the sharpest single-day gain in crude oil prices in over two years.
Israel Prime Minister Benjamin Netanyahu announced in a national address on Friday that Tel Aviv had launched a ‘targeted military operation’ aimed at dismantling Iran’s nuclear and ballistic missile capabilities. According to Netanyahu, Israeli forces struck Iran’s key enrichment facility at Natanz, targeted top nuclear scientists, and hit the core of Iran’s missile development infrastructure.
“This operation will continue for as many days as it takes to remove this threat,” Netanyahu stated, signalling the possibility of an extended campaign. The latest offensives between Israel-Iran jolted investors across global energy markets, who fear massive supply disruptions if the crisis deepens.
Adding to the concerns, Israel has also declared a state of emergency, expecting retaliation from Iran. Even though US President Trump warned of chance of a massive conflict between Israel and Iran, he denied Washington’s involvement in Tel Aviv’s attacks.
Why Are Oil Prices Sensitive to Israel-Iran Conflict?
The conflict between the two nations exposes the entire oil-rich Middle East region to a state of geopolitical crisis which threatens to cause massive disruptions to oil supply and production.
To quantify, Iran produces around 3.3 million barrels of crude oil per day (roughly 3% of global crude supply) and exports about 1.5 million barrels daily, with China accounting for nearly 80% of its exports, followed by countries like Turkey.
Strategically, Iran also sits on the northern edge of the Strait of Hormuz, a key chokepoint in world trade route through which over 20 million barrels of oil passes each day, primarily from producers like Saudi Arabia and the UAE. In the past, Iran has threatened to block this vital route in response to rising tensions, raising concerns of a severe global supply disruption if the conflict escalates.
“Hence a wider Middle East conflict with impact on Saudi, Iraq, Kuwait and UAE oil supplies can lead to sharp spike in oil prices,” said Madhavi Arora, Chief Economist at Emkay Financial Services.
“The economic consequences of this Israeli strike can be profound if the attack and counter attack by Iran lingers long. Israel has already declared that the operation will last several days,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
The Future for Brent Crude Prices?
While the latest flare-up in Middle East tensions has triggered a sharp knee-jerk reaction in oil markets, analysts aren’t hitting the panic button just yet.
Despite the spike in prices, Norbert Rücker, Head of Economics and Next Generation Research at Julius Baer, believes the situation may stabilise. He points out that OPEC’s plan to ease production cuts by over one million barrels per day should be enough to meet the anticipated rise in global oil demand.
Echoing a similar view, Emkay Global Financial Services expects Brent crude to average around $70 per barrel in FY26, with the first quarter likely hovering between $67–69.
Rücker further expects oil prices to gradually cool off, easing toward $65 per barrel, which he says sits at the upper end of what fundamentals justify.
However, not everyone shares the optimism. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, remains cautious.
“Brent crude has already surged to $78, and prices could climb even higher if Iran retaliates by closing the Strait of Hormuz, a key route for global oil shipments,” he warned.
