Oil prices plunge after Iran-Israel ceasefire resumes

Just yesterday, the market was living in fear of a new oil crisis: attacks, threats to block the Strait of Hormuz, record prices for futures. But after the announcement of the renewal of the truce between Iran and Israel, oil prices collapsed by almost 17% from the weekly peak. Geopolitics has given way to market realities, and traders are once again counting the risks and opportunities against the backdrop of unexpected stabilization.

Oil storage facilities in Crockett, California, in January. Photograph: David Paul Morris/Bloomberg 

Main story: how the ceasefire affected the oil market

On June 23, US President Donald Trump announced that a full ceasefire had been reached between Iran and Israel. He said that Iran would cease attacks immediately and Israel would do so within 12 hours. If the parties abide by the agreement, the 24-day escalation would officially end. Bloomberg, ReutersThis immediately affected oil prices: Brent fell by 7,2% ($71,48 per barrel), WTI by 7,2% ($68,51), and the next day prices fell by another 4-5%. BBC, CNN.

Key reasons for the fall: removal of risk premium and market logic

The main driver of the decline is the disappearance of the risk of supply disruptions through the Strait of Hormuz, through which more than 20% of global oil exports pass. ASUSAAlthough Iran threatened to close the route, in practice the strait remained open. None of the strikes hit oil infrastructure, and Iran limited itself to a symbolic response to a US base in Qatar. AngelOne.

Analysts note: the “geopolitical premium” has disappeared, and the market has returned to fundamental indicators - excess supply and weak demand. OPEC+ has repeatedly assured that it is ready to compensate for any losses of Iranian oil, and Saudi Arabia and the UAE have reserve capacity for a quick response ETF.com.

Price dynamics: from peak to collapse

As recently as June 21, Brent was at $81 per barrel after the US strikes on Iranian nuclear facilities. But by Tuesday, June 24, the price had fallen to $68–69 — below the level at which the escalation began. CNN, Italic. WTI traded at $65,33–66,24, which was also the lowest in the last two weeks. Economic Times.

In total, oil has lost almost 17% from its local high in two days. This is the biggest drop since the beginning of the year, and it came against the backdrop of rising stock markets and a strengthening dollar. ExchangeRates.org.uk.

Reaction of stock exchanges and markets: stocks rise, dollar weakens

Falling oil prices led to gains in indices in the US, Europe and Asia. Stock markets reacted positively to reduced risks to the global economy, and the dollar weakened against the backdrop of dovish Fed rhetoric. CNNAnalysts note: cheaper oil reduces inflation, eases pressure on businesses and consumers, and also provides room for rate cuts in the future.

Geopolitics and oil: has the risk of escalation disappeared?

Despite the market optimism, analysts warn that the truce between Iran and Israel remains fragile. Israel has already accused Iran of violating the agreement, an accusation Tehran has denied. Any new attack could send prices soaring again. BBCHowever, the parties are currently adhering to the agreements, and the Strait of Hormuz is operating normally.

Experts point out that “geopolitical rallies” in the oil market are usually short-term. Unless there is a new escalation, prices will remain under pressure from fundamental factors — excess supply, weak demand, and high inventories. AngelOne.

Fundamental factors: demand, supply, OPEC+

Global oil demand remains weak due to slowing economic growth in China, Europe and the US. OPEC+ has already raised quotas several times this year, and Saudi Arabia and the UAE have enough spare capacity to offset any losses. ETF.comOil inventories in the US and China remain high, and traders expect prices to fall further if the Middle East remains stable.

Additional pressure on the market is being created by Trump's statements about allowing China to buy Iranian oil, which could increase supply. CNBC.

Forecasts and scenarios: what will happen to oil prices next?

Most experts predict that if the ceasefire holds, Brent will trade in the $65–70 range per barrel, and WTI — $62–67. If the escalation resumes, prices could quickly return to $80–85. ItalicThe key factor remains news from the Strait of Hormuz and OPEC+ policy.

Traders are advised to monitor US inventories, Chinese demand dynamics, and OPEC+ quota decisions. Any new geopolitical tension could instantly impact the market.

Conclusions: The oil market is returning to fundamental realities

The resumption of the Iran-Israel truce has removed the main risk for the oil market - the threat of disruptions through the Strait of Hormuz. Prices have fallen sharply, and attention has shifted to demand, supply and the actions of OPEC+. However, the situation remains fragile: any new escalation could return the “geopolitical premium” to prices. For now, the market has received a respite, but remains in a state of heightened sensitivity to news.

Sources

Bloomberg,
Reuters,
BBC,
CNN,
AngelOne,
ASUSA,
ETF.com,
CNBC,
Italic,
Economic Times,
ExchangeRates.org.uk