After gains exceeding 4% at the start of weekly trading in the Asian session today, Monday, June 16, crude oil prices recorded declines in the middle of the European session, erasing all of their daily gains as investors assessed the ongoing conflict and the attack between Iran and Israel, which has become the primary driver of oil markets. US crude (NYMEX) fell by approximately 0.93%, trading at $72.30 per barrel, while Brent crude traded at $73.65 per barrel, down approximately 0.78%.
Investors and traders in energy markets are closely monitoring developments between Israel and Iran and the extent of the impact of this conflict, from which vital crude oil export infrastructure has so far been spared. This conflict is considered the greatest threat to the energy sector, especially with regard to the Strait of Hormuz, through which approximately one-fifth of daily production is exported, according to Reuters. It is not unlikely that Tehran will resort to closing the strait. Iran produces approximately 3.3 million barrels of oil per day and exports approximately 2 million barrels. Therefore, a production shutdown in Iran, if Iranian production were to cease, would likely support higher crude prices. Although some reports have indicated that OPEC+ producers’ spare production capacity could compensate for this disruption, the scenario of a closure of the Strait of Hormuz remains the most significant supporter of any potential price increases.
Morgan Stanley raised its crude price forecast by $10 in its latest forecasts, citing rising risks of conflict in the Middle East.