Oil traders are strapping in as the Middle East lights up again, this time with the U.S. stepping straight into the Iran-Israel conflict. That’s the kind of headline that makes crude charts jump, and guess what? Brent and WTI both popped over 2% overnight.
With Tehran vowing “all options” to defend itself after U.S. strikes on its nuclear facilities, we’re not just trading barrels anymore, we’re trading geopolitical nerves.
Here’s what could send oil toward $100 this summer:
1. U.S. Joins the Fight
After weeks of airstrikes between Israel and Iran, the U.S. has now bombed Iranian nuclear sites. Iran’s foreign minister warned the country could hit back in any way it wants. When a key OPEC producer talks escalation, traders listen, and hedge.
Brent is back near $78.50, WTI over $75.20, but the real action could be yet to come if missiles keep flying.
2. Strait of Hormuz in the Crosshairs
Iran’s parliament just greenlit a threat to close the Strait of Hormuz, an oil artery moving 20 million barrels daily. Even a minor scuffle there can send tankers scrambling and crude prices spiking.
Morgan Stanley Analysts say a full shutdown could push oil back to 2022 levels, or higher. Some call $100 conservative if this drags on for weeks. The last two Gulf Wars didn’t even fully close Hormuz. This time? No one’s betting against chaos.
3. Supply Shock Fear Returns
Remember the Ukraine war shock in 2022? Traders do, and they see a replay on the horizon. JPMorgan says regime change or heavy conflict in Iran would hit supply hard and fast.
Energy experts warn that replacing that lost oil is no overnight fix. Every missile risk adds a dollar to the barrel.
4. Volatility Back at War Levels
The CBOE Oil Volatility Index is back where it was when Russia stormed into Ukraine. Uncertainty loves company, and oil traders thrive on panic hedges.
Andy Lipow, president of Lipow Oil Associates, says it bluntly: “This time feels different.” And he’s not alone.
5. Still, Some Restraint… For Now
Ironically, neither side wants oil itself blown to bits, yet. Iran and Israel have avoided direct hits on oil infrastructure so far, and U.S. allies would push hard to keep tankers moving.
Veteran traders say threats to close Hormuz are routine bluff cards, but with missiles flying and a nuclear site bombed, it’s not a joke trade this time.
Here’s the Takeaway:
Geopolitics just hijacked the oil market’s summer story. As long as Iran-Israel tension stays hot, and the U.S. stays in, oil traders won’t dare fade the risk.
Keep watch on Hormuz headlines. If tankers stop, $100 oil could look cheap in hindsight.
