Market Minute: Oil Markets on Edge — But Tensions May Not Last

Following renewed conflict between Israel and Iran, oil markets are pricing in heightened geopolitical risk after months of subdued volatility. During the overnight session on Thursday, WTI Crude briefly surged above the $77 level as traders were caught off guard by Israel’s airstrikes on Iranian nuclear and weapons facilities. While prices faded from the highs somewhat into Friday’s close, WTI crude still ended the week with over a 12% gain.

The primary concern for oil traders is the potential impact on maritime logistics and regional energy infrastructure. As of now, there have been no confirmed disruptions to key transport routes or onshore oil assets. Land-based rigs remain unaffected, and crucially, there has been no interference reported in the Strait of Hormuz — the world’s most important oil transit chokepoint.

The Strait of Hormuz, which connects the Persian Gulf to the Gulf of Oman, handles over 21 million barrels of crude oil and petroleum products daily, according to the U.S. Energy Information Administration (EIA). That’s roughly 1.6 times the daily production of the United States, the world’s top oil producer. Any escalation in the region that compromises this vital corridor would carry significant consequences for global energy markets, far more so than disruptions in the Suez Canal or Red Sea.

So far, Iran has not indicated any intention to weaponize control of the Strait. 

From an infrastructure standpoint, Israeli strikes have not targeted critical energy assets such as refineries, offshore platforms, or pipelines. 

While oil markets remain jittery amid geopolitical uncertainty, the lack of immediate disruption to logistics and infrastructure has helped limit broader fallout. However, the situation remains fluid. Should the conflict escalate—particularly in a way that threatens the Strait of Hormuz—markets may respond more aggressively. Outside of this risk event, global oil demand is still lackluster and although prices have advanced from the lows earlier this year, more is needed on the demand front to keep prices significantly elevated.