Maritime & Shipping, Crude Oil, Refined Products

June 12, 2025

Middle East oil producers monitor tensions as Iran nuclear talks falter

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HIGHLIGHTS

Energy companies implement contingency plans

New Iran threats could raise tensions further

Platts Dubai crude assessment jumps 3%

Oil producers operating in the Middle East are closely monitoring escalating regional tensions as nuclear negotiations between the US and Iran appear increasingly fragile, prompting crude prices to surge overnight on fears of a potential military confrontation with Tehran involving Israel.

Brent crude futures surged more than 4% on June 12, briefly spiking over $70/b, reflecting market concerns over supply disruption risks after US officials were reportedly told that Israel is ready to launch an operation against Iran.

Separately, Iran warned that American military bases fall within range of its weapons should nuclear talks collapse. That prompted the US to withdraw nonessential US Embassy staff in Iraq, while nonessential personnel and families of American military and diplomatic staff in Bahrain and Kuwait have been authorized to leave those countries.

Platts, part of S&P Global Commodity Insights, assessed Dubai crude 3% higher at $68.59/b on June 12, while Iraq's Basrah Medium in Singapore rose 2% to $67.45/b.

However, war risk premiums rarely last long, said Ehsan Khoman, head of commodities research at MUFG. Only in cases where supply is significantly impacted, such as during Iraq's invasion of Kuwait in 1991, did prices stay elevated for more than 100 days, he said.

By 1310 BST June 12, Brent crude futures had fallen 1.3% on the day to trade at $68.86/b.

Potential targets

The International Atomic Energy Agency's (IAEA) board of governors formally declared on June 12 that Iran is in breach of its non-proliferation obligations for the first time in 20 years, citing "many failures" to provide full answers about its undeclared nuclear material and activities.

Oman on June 12 confirmed that the sixth round of nuclear talks will be held on Sunday, June 15, in Muscat.

"If Israel does go alone, then the specific assets that they are going to go after are nuclear rather than energy," Khoman said.

Energy infrastructure has not been expressly threatened by any party thus far, but refineries, storage units, and pipelines have been historically targeted across the Persian Gulf in past regional conflagrations.

A new Israel-Iran confrontation could be most acutely felt in gas and LNG markets, according to analysts at Commodity Insights.

"The specific risk to LNG supply is that Iran could retaliate by threatening shipping through the Strait of Hormuz, through which just under 20% of global LNG exports pass -- mainly Qatari cargoes but also including exports from the UAE. Any disruption of LNG shipping lanes or targeting of other regional LNG and gas infrastructure would have an immediate and major impact on gas/LNG markets," the analysts said in a note.

Meanwhile, state and international oil companies are so far operating normally but are monitoring the situation closely.

Operations at Bahrain's Bapco Energies remained unaffected, according to a statement provided to Platts on June 12.

"Comprehensive precautionary measures and contingency plans are in place to ensure the safety of our people and the continuity of our operations should circumstances evolve," the Bapco Statement said.

Shell, which operates in Kuwait, Bahrain and Iraq, is watching the situation carefully, a spokesperson told Platts.

In Iraq's semi-autonomous Kurdistan region, an oil company source said operators there were concerned given their proximity to Iran and their vulnerability.

But for now, operations continue as normal and the spokesperson for APIKUR, a trade group that represents international oil companies in Kurdistan, said members were watching the situation closely.

Iran has targeted critical infrastructure in Kurdistan previously when relations sour with the US, especially the Khor Mor field oil and gas field.

Typically somewhat tense, relations between Baghdad and Kurdistan have been even more fractious lately, with Baghdad deeming illegal a series of contracts signed by US companies and the Kurdistan Regional Government. Additionally, Baghdad has recently called out "continued oil smuggling" from Kurdistan and has withheld some salaries from KRG employees.

A region enflamed

At the heart of the nuclear talks are two nations at loggerheads over Iran's uranium enrichment, with the US staunchly opposed to any activity that would push Iran toward weapons-grade uranium.

On June 12, Iran's atomic organization chief Mohammad Eslami said that the country's third uranium enrichment facility was ready for the installation of centrifuges, which could fan tensions further.

"We have built the location and prepared it. It's a secure location and an indestructible place," Eslami said in a phone call with state television. "As soon as the installation operations start, we will start the enrichment operation in that new site."

Speaking to the US, Eslami said that the country had failed to uphold obligations under the first nuclear deal, the JCPOA and had mounted more sanctions on Iran, rather than provide relief.

"They expect the Iranian government to remain silent and show no reaction," he said.

The US has levied a nearly continuous onslaught of sanctions on Iran over the past few months, though the US administration of President Donald Trump has gone after smaller targets, including trading houses and shipping companies located in India and the UAE, as well as some Chinese "teapot refineries."

Overall, the actual risk of war seems low, said Bjarne Schieldrop, chief commodities analyst Sweden's SEB bank.

"The last thing that Trump wants is war in the Middle East so he will do everything he can to avoid that," he said.

But he said that Israel is a "wild card," and should Israel strike, the US would be forced to back them up.

"There is no way that Israel can accept that Iran comes to the point where they have a nuclear weapon, it's a kind of existential threat. That is why it's a risk," he said.