Israel Iran Conflict Archives

Key Insights Oil and gold prices dropped sharply after U.S. President Donald Trump announced a ceasefire between Israel and Iran, easing market fears of a wider Middle East conflict. The risk premium on oil has been partially unwound, though analysts warn that a blockade of the Strait of Hormuz could still send prices soaring. TEXAS (MarketsXplora) – Oil and gold prices slumped on Tuesday as investors reacted to a U.S.-brokered ceasefire between Israel and Iran, easing fears of a wider Middle East conflict and disruption to global energy supplies. Brent crude futures fell $2.14, or 2.99%, to $69.34 per barrel, while U.S. West Texas Intermediate (WTI) dropped $2.07, or 3.02%, to $66.44 per barrel. Earlier in Asian trading, prices had declined more sharply—Brent was down 5.3% to $67.66, and WTI slid 5.5% to $64.76—as markets priced out a so-called war premium that had built up during the recent escalation. Gold also slipped more than 1%, touching a near two-week low of around $3,340 per ounce, as risk sentiment improved on news of the truce. The downturn followed U.S. President Donald Trump’s late-Monday announcement of a ceasefire between Israel and Iran, delivered via his Truth Social account. The development offered a potential off-ramp from weeks of heightened military activity that had raised alarms over oil supply from the Middle East and spurred a nearly 20% rally in crude over the past month. Ceasefire Faces Tests Despite the agreement, uncertainty lingers. Analysts warned that the ceasefire's durability remains in question, especially given unresolved tensions around Iran’s nuclear program—a key factor behind Israel’s initial strikes. “Trump has flipped a switch, and the market is responding,” said Kathleen Brooks, research director at XTB. “Although risk sentiment is sensitive to headline risk.” The conflict had escalated sharply in mid-June when Israel launched strikes on Iranian nuclear facilities, prompting retaliatory action from Tehran and direct U.S. involvement, including strikes on three Iranian sites. Iran responded by targeting a U.S. air base in Qatar, further fueling fears of a broader regional war. Yet, in a move that surprised many, Iran refrained from blocking the Strait of Hormuz—a narrow shipping lane critical to global oil flows—despite parliamentary approval to do so. The strait handles between 20% and 30% of the world’s oil and gas shipments and is a chokepoint for exports from major producers including Saudi Arabia, the United Arab Emirates, Iraq, Kuwait, and Bahrain. Market Repricing and Forecasts With a de-escalation in sight, analysts noted a swift unwinding of the geopolitical risk premium embedded in oil prices. “The rapid oil price decline earlier today was a sign that the market is taking this agreement as a done deal,” Brooks added. The risk of a Hormuz closure remains a key tail risk, according to Barclays analysts. “Oil prices would race past $100/b in such a scenario, due to limited avenues to bypass the narrow passage,” they noted. Despite the easing in prices, major institutions remain cautious. Goldman Sachs on June 23 maintained a base-case forecast of $95 per barrel for Brent in Q4 2025, with potential for prices to reach $110 if the strait is half-blocked for a month. J.P. Morgan sees a base range in the low-to-mid $60s for the second half of 2025, but warned that a full-blown regional war or a Hormuz shutdown could push prices to $120–130. Citigroup projected $75–78 per barrel if Iranian exports fall by 1.1 million bpd, and up to $90 if disruptions hit 3 million bpd. Rystad Energy expects prices to remain capped below $80 while shipments continue, but foresees a surge past $100 if the strait is closed. Iran produced 3.3 million barrels per day in May, according to OPEC data cited in its June oil market report. Any disruption to this supply—or that of its regional neighbors—could strain global markets. However, the International Energy Agency has said it holds 1.2 billion barrels of emergency stockpiles. Some OPEC+ producers also have spare capacity they could deploy if needed. Gold, Dollar, and Equities React Gold markets also responded to the shifting geopolitical winds. Prices dropped $45 per ounce in intraday trading, with analysts attributing the move to easing haven demand and improved risk sentiment. Yet, long-term forecasts remain bullish. Bank of America on June 22 reiterated its $4,000/oz target within 12 months. Goldman Sachs maintained its $3,700 base-case by year-end, with upside to $3,880 if a recession emerges. J.P. Morgan projects an average of $3,675/oz in Q4 2025, and MKS PAMP expects a climb to $3,500 in the next 2–3 months. Meanwhile, the U.S. dollar—the preferred safe-haven during the earlier stages of the crisis—lost ground, becoming the weakest performer in the G10 currency basket. Despite heightened tensions earlier in the month, broader financial markets remained resilient. The VIX volatility index showed limited movement, and U.S. stock markets posted gains. Only the Eurostoxx index saw notable losses, down more than 2% over the past week. “The market had a far stronger reaction to U.S. trade tariffs than to geopolitical risk, which highlights that economic concerns are more worrying for stock markets than geopolitical issues, at this stage,” Brooks observed. For now, markets appear to be placing faith in the ceasefire’s staying power. But analysts caution that any sign of its collapse could quickly reverse the current market direction. “Risk sentiment is sensitive,” Brooks said. “If there are more signs that the ceasefire is not holding, we could see the oil price resume its uptrend.”

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