Middle East Tensions and the Shifting Dynamics of Oil Prices

Historically, such events would have triggered prolonged price spikes. Yet, after initially climbing to $81.40 per barrel, Brent crude retreated sharply, falling to $67.14 following a fragile ceasefire announcement.

This moderation underscores a fundamental shift in the way global oil markets price geopolitical risk. While threats such as the potential closure of the Strait of Hormuz—a critical chokepoint for 20% of global oil—previously drove prices sharply higher, today’s market participants appear more rational and data-driven. Analysts attribute this to the sophistication of market intelligence, including real-time satellite tracking of shipments and infrastructure.

Moreover, oil-producing nations have invested heavily in infrastructure that mitigates the risk of supply disruptions. Saudi Arabia’s Red Sea pipeline and the UAE’s Fujairah terminal provide alternative export routes bypassing the Strait entirely. These investments, along with ample strategic reserves, have reassured markets and helped contain price volatility.

Another contributing factor is the declining influence of the Middle East on global oil supply. OPEC’s share has shrunk from over 50% in the 1970s to just 33% in 2023, thanks to burgeoning production in the U.S., Brazil, and Canada. As a result, even regional conflicts no longer have the same leverage over global pricing.

Still, temporary price surges can impact inflation and consumer costs. Should Brent rise toward $100, analysts warn of fuel price increases exceeding 155p per litre in the UK and inflationary pressures that could disrupt central banks’ rate-cutting cycles. Businesses, lacking regulatory price caps, remain particularly vulnerable.

In sum, while the geopolitical landscape remains volatile, global energy markets have matured. Oil prices are now driven less by panic and more by fundamentals, signalling a new era of measured, infrastructure-buffered resilience.

Sources & References

BBC. (2025). How the attacks on Iran could affect oil prices and energy bills. https://www.bbc.com/news/articles/cg5vr2rvzg4o 

CNN. (2025). Oil is falling so much it’s now cheaper than it was before the Iran-Israel conflict. https://edition.cnn.com/2025/06/24/business/oil-prices-fall-iran-israel-ceasefire-intl 

Reuters. (2025). Israel-Iran war highlights Mideast's declining influence on oil prices. https://www.reuters.com/markets/commodities/israel-iran-war-highlights-mideasts-declining-influence-oil-prices-2025-06-25/ 

U.S. Energy Information Administration, Crude Oil Prices: Brent - Europe [DCOILBRENTEU], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DCOILBRENTEU, June 29, 2025.