What the Israeli attack on Iran and the spike in oil prices mean for markets

CNBC

13-06-2025

Israel's attack on Iran took out some key military targets and sent oil prices spiking . The full impact of the conflict on the energy markets is still up in the air, according to Wall Street experts. The initial takeaways from the reports indicate that the attacks did not hurt any of Iran's energy infrastructure. However, the worry is that an escalating conflict will damage infrastructure in Iran or elsewhere in the region, and disrupt shipping in and around the Persian Gulf. "Despite the ~[$10/barrel] move higher in prices over the past three days, the worst case outcome is far from being in the price, in our view," Barclays analyst Amarpreet Singh said in a note. Another thing to keep in mind is that oil prices are coming off a low base. The front month futures for West Texas intermediate crude jumped 8% Friday morning, but were still below $75 per barrel. @CL.1 YTD mountain Oil prices jumped after Israel attacked Iran. The change in oil prices will have spillover impacts in other asset classes. Thomas Matthews, the head of markets for Asia Pacific at Capital Economics, said in a note that the dollar seems to be acting as a "safe haven" trade after the attacks but that a sustained jump in oil prices could hurt Treasurys if it leads to higher inflation expectations. "In the event that the conflict leads to a sustained period of higher oil prices the upside risks to Treasury yields (and government bond yields more broadly) would intensify. Long-term inflation break-evens have not moved much so far. But over longer time horizons, they tend to move closely with oil prices," Matthews wrote. Here are some other key perspectives from Wall Street analysts: UBS energy analyst Henri Patricot: "The attacks appear to have not damaged [Iran's] oil infrastructure, at least so far ... Hence the increase has been for now fully driven by the higher risk premium, rather than actual supply impacts. ... The direction for oil prices from here will very much depend on the extent and nature of Iranian retaliation." RBC Capital Markets head of global commodity strategy Helima Croft: "Oil has already spiked following tonight's move, and its ultimate landing point will likely hinge on whether Iran revives the 2019 playbook and targets tankers, pipelines and key energy facilities across the region. There will obviously be heightened concern about the security of the Strait of Hormuz given that 20.9 [million barrels per day] are transported through the waterway on a daily basis. It is our understanding that it would be extremely difficult for Iran to close the strait for an extended period given the presence of the U.S. Fifth Fleet in Bahrain." Piper Sandler global energy strategist Jan Stuart "We would not fade any oil price rally; this is war; this is not a demonstration of capability as were the Oct. 1 and April 2024 and Sept 14, 2019 Iranian strikes and 2 associated Israeli retaliations." Bank of America economist Jean-Michel Saliba: "An oil price spike could support oil exporters in the Gulf region, assuming no disruptions to flows. Aramco stocks held outside the Middle East could smooth the impact of any short-lived disruption. We expect the Group of Eight within the Organization of the Petroleum Exporting Countries (OPEC) to remain focused on market management and the planned return of [circa] 0.8mn bpd in production over July and August meetings" Arctic Securities analyst Ole-Rikard Hammer: "The initial violent reaction suggests the market is pricing in the risk of a longer-term conflict. The paper market's persistent bearish skew means there are plenty of short positions to cover, however. The dust needs to settle somewhat, in other words. If our interpretation that the market will price in a prolonged supply risk is correct, this should facilitate a shift back to the market's previous trading range of $70-80." JPMorgan analyst Otar Dgebuadze: "The Strait of Hormuz is the sole route for exporting Qatari and UAE LNG volumes, with Qatar and the UAE collectively accounting for 20% of global LNG supply. Any disruptions to these flows could significantly affect global natural gas prices." Citigroup strategist Antony Yuen: "We believe that energy flow disruptions should be limited. Heightened geopolitical tensions may well remain, but we don't expect energy prices to stay elevated for a sustained period of time. The Trump administration's goal of achieving lower oil prices likely gets more difficult with this operation." Barclays energy analyst Lydia Rainforth: "However, with the Strait of Hormuz back in focus, we see asymmetrical risks across the oil majors in case of any local logistic disruptions. TTE, BP, Eni, and Exxon have the highest exposures." — CNBC's Michael Bloom contributed reporting.