Iran-Israel conflict may mark shift in geopolitical risk for energy markets

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During Iran and Israel’s 12-day showdown last month, neither side meaningfully attacked oil infrastructure. Experts say it’s like there’s a new “taboo” against using energy as a weapon. 

When Israel hit Iran’s nuclear sites in June, Brent crude immediately jumped from around $64 to over $80 a barrel. Everyone braced for Iran to blockade the Strait of Hormuz, which carries more than a quarter of global seaborne oil trade. But instead, Iran responded with a symbolic missile strike on US bases. 

Iran is exporting roughly 1.8 million barrels a day, mostly heading to China. If they had choked the Hormuz route, they’d tank their own economy and anger their top buyer. On Israel’s side, they steered clear of hitting Iranian oil platforms, likely because they'd risk global backlash if prices spiked.  

So, even with tensions high, the market stopped focusing on the risk of the conflict, and went back to focusing on the fundamentals.  

Unless something drastic happens like a physical supply disruption, it looks like market basics are calling the shots — maybe ushering in a new era with lower energy risk premiums