Oil dips, still eyes third weekly rise on Mideast unrest

June 20, 2025 (MLN): Oil prices fell on Friday but remained on track for a third straight weekly rise, as geopolitical tensions in the Middle East continued to rattle markets and the White House delayed a decision on potential U.S. involvement in the ongoing Israel-Iran conflict.

Brent crude futures had dropped $1.58, or 2%, to $77.27 a barrel. Despite the decline, they were still poised to gain almost 4% over the week. 

Meanwhile, U.S. West Texas Intermediate (WTI) crude for July delivery, which did not settle on Thursday due to a U.S. holiday and expires on Friday, rose 52 cents, or 0.7%, to $75.66.

The more actively traded August contract was up 56 cents, or around 0.8%, to $74.06.

On Thursday, prices had surged nearly 3% after Israel bombed nuclear sites in Iran, prompting a response from Iran, OPEC’s third-largest producer, which launched missiles and drones at Israel.

Both nations showed no signs of de-escalation as the conflict entered its second week.

However, Brent prices later pared gains following a statement from the White House, which noted that President Donald Trump would make a decision within two weeks on whether the U.S. would intervene in the conflict.

Commenting on the situation, PVM analyst John Evans warned, “While Israel and Iran carry on pounding away at each other, there can always be an unintended action that escalates the conflict and touches upon oil infrastructure.”

He added that although the global oil supply is currently sufficient for 2025, this could change dramatically if the conflict leads to disruptions in the Arabian Sea, where up to 20 million barrels per day could be at risk, even if only temporarily.

Iran has previously threatened to close the Strait of Hormuz in retaliation for Western pressure, a move that could significantly restrict trade and drive global oil prices higher.

Commercial ships are reportedly staying close to Oman, while maritime agencies have advised them to avoid Iranian waters near the strait.

Panmure Liberum analyst Ashley Kelty noted, “I think the current risk premium is close to $10 per barrel for Iran-Israel,” adding that he does not expect prices to retreat to the $60 range in the near term.

He further cautioned that a sharp escalation, such as Israel targeting Iranian export infrastructure or Iran disrupting shipping through the Strait, could push oil prices to $100 per barrel.