Israel launched a large-scale airstrike on Iran on Friday, June 13, killing multiple senior Iranian military officers. In response, Iran deployed over a hundred drones, escalating tensions in the Middle East. This led to a rapid spike in global oil prices and a general decline in stock markets across Asia and Europe.
According to the Israeli military, the airstrike targeted the elite forces and military facilities of the Islamic Revolutionary Guard Corps (IRGC) as retaliation for Iran’s recent use of drones and missiles to attack Israel. Following the revelation of this news, international markets reacted quickly, with Brent crude oil surging over 10% at one point, reaching a new high since January before slightly pulling back. The price still rose by about 8% from the previous day’s closing, settling at around $74.65 per barrel.
Analysts told the BBC that energy traders will now focus on the escalation of conflicts in the coming days. If tensions between Israel and Iran continue to escalate, it could jeopardize the stability of oil supplies in the Middle East. Oil price fluctuations not only affect fuel costs but also impact essential costs such as food prices in supermarkets.
Vandana Hari, founder of Vanda Insights, stated, “This is a high-risk situation that could either quickly de-escalate, as seen in the direct clashes last April and October, or if it evolves into a full-scale war, it will severely impact the global oil market.”
Israel Defense Forces (IDF) reported that after Israel’s attack, Iran launched approximately 100 drones towards the country. Earlier that day, Israel struck about 100 targets in Iran, including nuclear facilities and military command centers, resulting in the killing of top officials, including the Iranian Armed Forces’ chief commander and several top nuclear scientists.
Capital Economics analysts indicated that if Iran’s oil infrastructure is targeted, oil prices could possibly rise to $80 to $100 per barrel. However, other oil-producing countries may increase production to alleviate price pressures and curb inflation.
There are concerns that Iran may block the strategic shipping route of the Strait of Hormuz, further disrupting oil supplies. This strait accounts for nearly one-fifth of global oil transport daily, making it a vital artery for global energy supply.
Saul Kavonic, energy research director at MST Financial, pointed out that the next one or two days will be a crucial period to assess the situation’s direction, stating, “The market is currently only reacting preliminarily, but risks could escalate rapidly.”
Despite the intense market fluctuations on Friday, oil prices remain more than 10% lower than the same period last year, significantly below the peak of $100 after Russia’s invasion of Ukraine in 2022.
Due to the conflict, stock markets in Asia and Europe generally experienced declines on Friday. The Nikkei Index in Japan fell by 0.9%, and the FTSE 100 Index in the UK dropped by 0.3% at midday.
Safe-haven assets such as gold and the Swiss franc strengthened, with gold prices rising by 1.2% to $3,423.30 per ounce, reaching a two-month high.