Morning Highlights: Crude Prices Steady as Israel-Iran Tensions Leave Oil Flows Unharmed

Market Snapshot (as of 06:30 EST)

• Brent (Aug): $73.79 (-$0.44 | -0.6%)

• WTI (July): $72.52 (-$0.46 | -0.6%)

Oil prices eased Monday morning as traders reassessed geopolitical risk following a volatile weekend of Israeli and Iranian missile exchanges. Despite renewed military action, neither country has targeted energy infrastructure directly, and the Strait of Hormuz remains open, easing immediate fears of supply disruptions.

Both benchmarks initially spiked by more than $4 a barrel in overnight trading before retracing gains. Friday’s surge of over 7% had pushed Brent and WTI to multi-month highs, driven by escalating conflict and speculation around a broader regional crisis.

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Key Drivers Today

Israel-Iran Conflict Escalates but Spares Oil Infrastructure (For Now)

• Iranian missiles struck Tel Aviv and Haifa on Monday, destroying residential infrastructure and prompting concerns at the G7 summit about the conflict’s potential to expand.

• Both militaries exchanged fire throughout the weekend, resulting in civilian casualties and fresh calls for restraint.

• Crucially, no confirmed damage to production or export terminals in either country has been reported. Iranian strikes have so far avoided Hormuz or Saudi/UAE targets.

Strait of Hormuz in Focus

• Roughly 20% of global oil flows — around 18 to 19 million barrels/day — transit through the Strait of Hormuz.

• While it remains open and unaffected, markets remain highly sensitive to any new threats in this chokepoint.

• Analysts warn that any disruption would trigger a freight and insurance premium surge, affecting global supply chains and possibly refiner margins in Asia.

OPEC+ Spare Capacity Provides Cushion

• Iran currently produces ~3.3 million bpd and exports ~2.2 million bpd, primarily to China.

• OPEC+ spare capacity — mostly from Saudi Arabia and the UAE — is estimated to be comparable in volume to Iran’s total output.

• If Iranian flows are interrupted, Chinese refiners would be expected to turn to alternative suppliers, including Russia and the Gulf.

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Commentary & Outlook

Onyx Capital’s Harry Tchilinguirian: “It all boils down to how the conflict escalates around energy flows. So far, production and export capacity have been spared.”

Fujitomi’s Toshitaka Tazawa: “A Strait of Hormuz shutdown would be the red line for oil traders… The current premium is still moderate compared to the level of risk being priced.”

S&P Global’s Richard Joswick: “Chinese refiners may face logistical issues and margin pressure if forced to switch grades… this could narrow the Brent-Dubai spread and increase shipping costs.”

Rystad Energy: “Demand remains resilient, and any regional constraint would simply shift sourcing patterns—though not without cost to refiners.”

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Global Demand and Refinery Trends

• China’s May crude throughput fell 1.8% y/y, hitting its lowest level since August due to maintenance at both state-owned and independent plants.

• This softens near-term import demand, though the strategic stockpiling of Iranian barrels earlier this year may provide a cushion for Chinese refiners.

• In contrast, refiners in Japan and India continue to run at elevated rates due to strong summer product demand.

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U.S. & International Diplomatic Developments

U.S. (President Trump) Expressed hope for ceasefire but said countries “sometimes must fight it out.” Declined to press Israel to halt strikes.

Iran Cancelled nuclear talks with U.S. scheduled for Sunday in Oman; said it would not negotiate under attack.

Germany (Chancellor Merz) Pushing for G7 unity to prevent further escalation and preserve global energy stability.

Qatar/Oman Acting as intermediaries but reportedly received Iran’s firm rejection of a truce under current conditions.

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Industry Impact

• Baker Hughes CEO Lorenzo Simonelli said operations in the Middle East are stable for now: “All of our employees are safe, and the facilities continue to run.”

• The company is monitoring for possible disruptions but views the market as resilient given current demand.

• Shale Players Watchful: While U.S. output remains steady, elevated risk could benefit domestic producers if Middle East supply tightens significantly.

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Bottom Line

Despite a weekend of missile exchanges and heightened geopolitical tension, no major oil facilities have been impacted, and the Strait of Hormuz remains open. As a result, markets are pricing in a moderating risk premium, retracing some of Friday’s record surge.

If Iran or its proxies target infrastructure or shipping routes in the days ahead, prices could move sharply higher again. Conversely, signs of diplomatic movement at the G7 or from U.S. mediators could begin to deflate risk premium further.

Watch for updates on Hormuz, Chinese refinery activity, and U.S. diplomatic positioning—these will define the next price leg.