HOUSTON (Reuters): As Israel and Iran exchanged airstrikes on Friday, oil prices surged and ended the day 7% higher, escalating investor concerns that the conflict may significantly impair Middle Eastern oil supply. The price of Brent oil futures rose more than 13% to an intraday high of $78.50, the highest level since January 27, and then ended at $74.23 a barrel, up $4.87, or 7.02%. Brent was up 12.5% from the previous week. At $72.98 per barrel, U.S. West Texas Intermediate crude ended the day up $4.94, or 7.62%. WTI surged more than 14% throughout the day to reach $77.62, its highest level since January 21. A week ago, WTI increased 13% to its current level. The intraday movements of both benchmarks were the biggest since 2022, when energy prices surged due to Russia’s invasion of Ukraine. Israel announced Friday that it has launched a protracted campaign to stop Tehran from developing an atomic weapon, targeting Iran’s nuclear facilities, ballistic missile manufacturing, and military leaders. Iran has vowed to respond harshly. Multiple media outlets reported that Iranian missiles struck buildings in Tel Aviv, Israel, just after trading concluded on Friday. There were additional reports of explosions in southern Israel. Donald Trump, the president of the United States, called on Iran to reach a nuclear agreement in order to stop the “next already planned attacks.”
According to the National Iranian Oil Refining and Distribution Company, facilities for oil storage and refining have not been harmed and are still in operation. Currently producing over 3.3 million barrels per day (bpd), Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), exports more than 2 million barrels of gasoline and oil per day. Analysts and OPEC observers estimate that OPEC and its allies, including Russia, have spare capacity to pump more oil to compensate for any disruption, which is about equal to Iran’s output. Concerns of disruptions to the Strait of Hormuz, a crucial shipping route, have also been heightened by the most recent events. In reference to the Strait, Rabobank wrote, “Saudi Arabia, Kuwait, Iraq, and Iran are totally tied into one little passage for exports.” Approximately 18 to 19 million barrels of oil, condensate, and fuel per day (bpd), or one-fifth of the world’s total oil consumption, flow across the strait. Following additional conflicts in the Middle East, stocks plummeted on Friday, with the Dow down over 1.8%, the S&P 500 down over 1%, and the Nasdaq down 1.3%.
The facility that handles an estimated 90% of Iran’s crude oil exports, Kharg Island, is among the Iranian energy facilities that Israeli action has so far avoided, according to This makes it more likely that any additional escalation may follow the “energy-for-energy” logic, according to Hoff, in which an attack on one side’s oil infrastructure could prompt a counterattack on the other’s. Analysts warned Friday that blocking the Strait of Hormuz might have serious consequences for Iran. Iran exports all of its oil by sea, therefore the free flow of products and ships through the seaway is crucial to the country’s economy. Last but not least, analysts from JP Morgan said that closing the Strait of Hormuz would harm Iran’s ties with China, its only oil buyer. The U.S. Commodity Futures Trading Commission (CFTC) announced on Friday that money managers increased their net long positions in U.S. crude futures and options during the week ending June 10. Over the period, the speculator group increased its total futures and options position in London and New York by 15,157 contracts, to 121,911. According to Baker Hughes, there were 35 fewer oil and gas rigs overall, or 6% fewer than at same time last year, for the seventh consecutive week. This week, the number of oil rigs dropped three to 439, the lowest since October 2021, while the number of gas rigs dropped one to 113. Stocks fell in other markets, and people flocked to safe havens like gold, the US dollar, and the Swiss franc.