Oil Is Dancing In The US-Iran War Melody

Yesterday, Iran and Israel exchanged missiles for the first time since the April ceasefire. Trump came out shouting “stop”, and the markets? They ran. Oil surged more than 5% within a few hours, and then suddenly… it reversed downward. What exactly happened here? Why did it rise, and why did it fall afterward? WHAT HAPPENED IN THE WAR Let’s start from the beginning. On Sunday night, Iran and Israel exchanged strikes for the first time since the ceasefire agreement between the US and Iran in April. What went wrong? Iran accused Israel of repeatedly violating the ceasefire through its strikes in Lebanon. There was even an attack on the southern suburbs of Beirut. As a result, Iran launched missiles toward northern Israel. Israel responded with a “large-scale strike on strategic defense systems”, hitting military targets in western and central Iran. And here comes the confusing part. After a day of hostilities, Iran’s central military command announced that its operation against Israel was over. The Iranian Foreign Ministry confirmed this in comments to CNBC. So is everything over? Not exactly. At the same time, Iran warned of much harsher actions if Israel continues its attacks, especially in southern Lebanon. In other words: “we stop, but don’t push it”. NEGOTIATIONS AND A BLURRY SITUATION And this is where Trump enters the picture. He posted on Truth Social that both sides “want an immediate CEASEFIRE”, and that final peace talks are progressing “unless ignorance or stupidity gets in the way”. He also said the naval blockade would remain in place until a “final agreement” is reached. He went further. In a call with the Financial Times, Trump said Netanyahu “will have no choice” but to accept a deal negotiated by the US with Iran, because, as he put it, he “is in charge”. But there is a big “but”. An Iranian official involved in the talks told MS NOW something completely different: that “a deal with President Trump is no longer possible at this stage”, blaming Trump himself for the situation in Lebanon. On top of that, the speaker of Iran’s parliament, Ghalibaf, said the US naval blockade and Israeli strikes in Lebanon are violations of the ceasefire, and added that US and Israeli targets in the region are now “legitimate targets”. You can see why the market did not fully believe the “pause”. On one side you hear “it’s over”. On the other, “we may strike even harder”. Who do you trust? WHAT OIL DID Now to the most important part for markets: oil. When Iran launched missiles, prices exploded upward. More than 5%. At one point WTI rose as much as 5.5%. Brent reached $94.38 per barrel and WTI around $91.60.  And then? Once Iran announced it was ending its operation, prices pulled back from the intraday highs. And notice something important here. No agreement was signed. The war did not end. It was simply stated that “the operation is over”, with a huge asterisk attached. And that alone was enough to bring prices down. That is how markets move, on fear and hope. To put things in perspective, this all happened on an already extremely tense backdrop. The Strait of Hormuz is effectively restricted, which has squeezed global oil and gas flows. The International Energy Agency described it as the largest supply disruption ever. And yet, even at the peak of yesterday’s move, oil stayed below $100. In previous phases of the conflict, the global benchmark had approached $130. This shows how the market has so far avoided the worst case scenario. There is also another factor. OPEC+ agreed to increase production by 188,000 barrels per day starting in July. This is the fourth increase approved since the Hormuz situation escalated. In simple terms, more oil is coming into the market, helping prevent prices from spiraling. One more thing. The Houthis in Yemen announced a full ban on Israeli ships in the Red Sea. However, major shipping pl […]