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Market Volatility In the Middle East: Quick Brief: Week of 6/16

*Editor’s Note: We recognize the gravity of the recent military conflict between Israel and Iran, and the profound human suffering it has caused. Our thoughts are with all those affected by the current situation. 
 
In light of serious recent events, many clients have reached out regarding the energy market implications. Linked below is a Special Market Update from our global commodity experts, offering timely analysis of the oil market impact.  

We also invite you to follow our LinkedIn channel, where our Global Research & Analytics (GR&A) team shares weekly 10-minute video briefings every Monday at 10 AM ET. The following is a quick post-GEO live analysis from our team, the week of 6/16. 

Key Takeaways – week of June 16 

  • Short-term price spikes-are driven by geopolitical risk. 

  • Longer-term supply risks-are mitigated by OPEC+ capacity and strategic interests. 

  • Major chokepoint disruptions-are unlikely but remain a key risk factor. 

Crude Oil Market Volatility 

In the past few days, the escalating conflict between Israel and Iran has triggered significant volatility in global oil markets. Initial reports of Israeli strikes on Iranian nuclear facilities caused a sharp spike in crude prices. West Texas Intermediate (WTI) surged to its highest level since January, adding nearly $10/bbl at Friday’s peak, before pulling back on most of those gains. Despite a subsequent 5% pullback on the day of the broadcast, prices remain elevated compared to the previous week. 

Iranian Oil Supply Risk 

Iran currently exports between 1.5 and 1.8 million barrels of oil per day, accounting for approximately 1.5–1.8% of global supply. While not a dominant share, any disruption to this flow could significantly influence prices. Our GR&A team estimates that a full supply stoppage could add $10–$12 per barrel. However, with no complete disruption yet observed, markets are cautiously discounting the risk. 

Geopolitical and Market Dynamics 

OPEC+, led by Saudi Arabia and Russia, is actively working to increase production as they look to begin unwinding several years of significant supply cuts. Although Iran is a member of OPEC, it remains exempt from current production agreements due to ongoing sanctions. For context, while Iran exports close to 1.8 mmbbl/d, OPEC+ is in the process of unwinding 2.2 mmbbl/d of voluntary cuts, and Saudi Arabia alone has an estimated 3 mmbbl/d of spare production capacity. This situation may also present OPEC+ with an opportunity to regain market share without triggering a price collapse. 

Shipping and Chokepoint Risks 

Strategic shipping routes, particularly the Red Sea and the Strait of Hormuz, are under close watch. While long-term disruptions are not anticipated, increased insurance premiums and potential shipping delays could add to market uncertainty. 

Market Sentiment and Outlook 

Investor sentiment has moderated following the initial surge in oil prices. The market is now adopting a more measured stance, factoring in broader influences such as global demand trends, trade negotiations, and macroeconomic indicators. These elements will continue to shape oil price trajectories in the coming weeks. 

What’s Next? 

For Schneider clients, the conflict underscores the importance of monitoring geopolitical risks that could impact energy costs and supply chains. Clients relying on oil-dependent operations may face volatility in pricing and potential disruptions in logistics if the situation escalates further. 

Our Global Research & Analytics team provides a comprehensive mix of-quantitative and qualitative analysis-that informs Schneider’s forward-market views across: Natural Gas, Electric Power, Crude Oil, and Carbon Markets. 

This intelligence feeds into many other services across Schneider Electric’s portfolio. Our team looks forward to continuing to provide timely and relevant updates alongside market movements. 

For a deeper dive on this special market update, read more here.