Morning Highlights: Oil tumbles as Israel agrees to U.S. ceasefire proposal; Brent drops below $70

Tuesday, June 24, 2025

Crude prices fell sharply Tuesday to two-week lows after Israel accepted a U.S.-brokered ceasefire proposal with Iran, easing fears of an immediate disruption to Middle East oil flows.

Market snapshot (as of 6:20 a.m. EST):

• Brent (Aug): $69.39 (−$2.09)

• WTI (Aug): $66.50 (−$2.01)

The pullback extends Monday’s steep losses, with both benchmarks falling as much as 5% in early trading following President Trump’s announcement that a “complete and total” ceasefire would take effect. Brent, which hit a five-month high just days ago, is now more than $8 off that peak.

Geopolitical risk premium fades – for now

Israeli Prime Minister Benjamin Netanyahu said the country had achieved its objective of neutralizing Iran’s nuclear and ballistic threat, and would honor the ceasefire. But skepticism remains over its durability, as Israel also vowed to retaliate against Iran for missiles it claims were fired Monday—allegations Tehran has denied.

Barclays noted the decline reflects investor relief that U.S. strikes on Iranian nuclear sites have not triggered wider regional disruptions. Analysts caution that markets may remain volatile as the ceasefire develops.

Volatility underscores ongoing risk

Monday saw Brent trade in a $10 range, the widest daily swing since July 2022. Prices are still being underpinned by residual fears of escalation, particularly around the Strait of Hormuz, which handles up to one-fifth of global oil flows. SEB’s Ole Hvalbye noted that while the risk premium has deflated, “tensions between Israel and Iran remain unresolved—and the risk of missteps and renewed escalation still lingers.”

China remains most exposed to Iranian crude

As the largest buyer of Iranian oil—accounting for roughly 90% of Iran’s exports—China stands to be most affected by any disruption. So far in 2025, Chinese refiners have imported 1.38 million bpd of Iranian crude, largely routed through Malaysia to obscure origin and avoid direct sanctions.

Sanctioned Iranian oil continues to trade at deep discounts—currently $7–8/bbl below non-sanctioned Mideast grades—a key driver for cost-sensitive independent Chinese refiners.

Sanctions pressure rising

While Beijing rejects U.S. sanctions as illegitimate, Washington has expanded its crackdown, targeting three Chinese teapot refiners this year. Some mid-sized buyers have already reduced purchases as a precaution, and traders estimate that 100,000 bpd of Iranian crude has been replaced by non-sanctioned alternatives.

LNG freight surges on risk and rerouting

Separately, liquefied natural gas (LNG) shipping costs have climbed to their highest levels in eight months, driven by tighter vessel availability and war-related concerns.

• Atlantic LNG freight: $51,750/day

• Pacific LNG freight: $36,750/day

(Source: Spark Commodities)

The recent missile exchanges near the Strait of Hormuz have driven insurers to raise premiums by up to fivefold, and shipowners are increasingly cautious about entering the region. Longer routes via the Cape of Good Hope are also tightening supply, as Egypt’s recent tender for 160 LNG cargoes added further strain to vessel demand.