What happens when oil prices rise, but no one’s buying? It’s a bit like that old saying about political parties, but this actually played out between June 12 and the start of the conflict when Israel attacked Iran. By the end of the trading day, U.S. WTI prices were at $68.04 per barrel. Fast forward to June 24, and the price dropped to $64.50—showing not just a spike, but a 5% decrease in just two weeks.
So, you might wonder why crude prices didn’t see a significant increase. In a market influenced by various factors daily, the explanation turns out to be quite straightforward, hinging on two main issues.
- No significant strikes by Israel or the U.S. targeting Iran’s refining or export capabilities.
- Despite some threats from Iranian officials, they didn’t really take steps to stop tanker movement through the Strait of Hormuz, a crucial shipping route.
If Israel had targeted Iran’s infrastructure, it could have severely impacted exports. The International Energy Agency estimates a rough hit of about 1.7 million barrels per day, an enormous loss for the global market. And closing the Strait of Hormuz, which handles about 20% of the world’s crude oil, would have led to a far greater surge in prices. Yet, the oil continued to flow, resulting in only a slight upward tick in prices.
David Ramsden Wood, a well-respected analyst, summed it up nicely in his newsletter. He noted that “oil is still structurally bearish. U.S. producers are in PR mode but are slowing down exploration. There’s less investment, and the number of active rigs is going down. Shareholders are focused on returns, not growth.”
It’s true that crude prices could realistically have spiked due to the military action by Israel and the U.S. in mid-June. Back then, prices over $100 per barrel seemed likely, as the market was reacting to Middle Eastern tensions—uncertainties that made it hard to predict outcomes.
But things have changed. Advances in technology, including AI and machine learning, have transformed how traders assess the market.
In the past, traders often lacked real-time data during times of increased tensions in the Middle East, leaving them uncertain about production impacts. Nowadays, they can gauge potential consequences almost immediately.
This clarity has been particularly prominent in light of President Donald Trump’s transparency. With constant updates from his Truth Social platform, people could stay informed about U.S. actions.
According to Tim Stewart, president of the American Oil and Gas Association, markets are now better at integrating numerous variables into short-term models. “This isn’t a typical Republican administration. The management style creates confusion both ways, and traditional playbooks don’t apply anymore,” he explained. Traders recognize that the President sticks to his word, making it wise to plan ahead.
Moreover, with a high percentage of crude transactions being handled by automated, AI-driven systems, not as much goes on unnoticed anymore.
So, although a price surge was widely anticipated, it simply didn’t materialize—and the reasoning is pretty straightforward.
