Oil markets witnessed a dramatic surge on Friday, climbing 7% following the latest exchange of air strikes between Israel and Iran. The sharp rise has raised alarm among investors about potential disruptions to Middle Eastern oil exports, particularly through the strategic Strait of Hormuz.
Brent crude closed at $74.23 per barrel, gaining $4.87 or 7.02%. It had earlier surged more than 13% to hit $78.50 — the highest since January 27. Meanwhile, U.S. West Texas Intermediate (WTI) crude settled at $72.98, rising $4.94 or 7.62%, after touching an intraday high of $77.62, the strongest since January 21.
Both benchmarks recorded their biggest one-day moves since 2022, when the Russia-Ukraine war first rocked energy markets.
The spike followed Israel’s announcement of targeted strikes on Iranian nuclear facilities, missile sites, and military commanders, which Israeli officials say marks the start of a sustained operation aimed at preventing Iran from acquiring nuclear weapons. Iran has vowed to respond strongly.
Shortly after trading closed, reports emerged that Iranian missiles struck buildings in Tel Aviv. Explosions were also reported in southern parts of Israel.
Former U.S. President Donald Trump weighed in, urging Tehran to negotiate: “make a deal over its nuclear program to put an end to the next already planned attacks.”
Despite the heightened conflict, Iran’s National Oil Refining and Distribution Company confirmed that its refining and storage infrastructure remained intact and fully operational.
Iran, an OPEC member, produces around 3.3 million barrels per day (bpd) and exports more than 2 million bpd. Analysts note that spare production capacity among OPEC+ nations, including Russia, could theoretically offset Iran’s output if needed.
The conflict has sparked concerns over the Strait of Hormuz — the narrow but critical maritime passage that facilitates nearly 20% of global oil trade.
“Saudi Arabia, Kuwait, Iraq and Iran are wholly locked into one tiny passage for exports,” Rabobank noted in a research brief.
Ben Hoff, head of commodity research at Societe Generale, added: “Israeli action has so far avoided Iranian energy infrastructure, including Kharg Island, the terminal responsible for an estimated 90% of Iran’s crude oil exports.” He warned that further escalation might lead to tit-for-tat strikes: “an attack on one side’s oil infrastructure might invite a retaliatory strike on the other’s.”
JP Morgan analysts also highlighted the risk of closing the strait: “Iran’s economy heavily relies on the free passage of goods and vessels through the seaway, as its oil exports are entirely sea-based. Finally, cutting off the Strait of Hormuz would be counterproductive to Iran’s relationship with its sole oil customer, China.”
Meanwhile, traders ramped up bullish positions. According to the U.S. Commodity Futures Trading Commission, money managers raised net long positions in U.S. crude futures and options by over 15,000 contracts in the week ending June 10.
Adding to market volatility, energy services firm Baker Hughes reported a continued decline in U.S. drilling activity. Oil rig counts dropped by three to 439 — the lowest since October 2021 — while natural gas rigs also fell.
Beyond oil, investors rushed to safe haven assets like gold, the U.S. dollar, and the Swiss franc. Stock markets, in contrast, saw a sharp drop amid fears of a broader regional conflict.