Oil Prices Surge 3% as Investors React to Iran-Israel Ceasefire Deal

Oil prices surged by 3% as global investors responded to the Iran-Israel ceasefire agreement, signaling reduced geopolitical risk in the Middle East and shifting energy market dynamics

By Stephanie Kelly and Trixie Yap

(Reuters) –Oil prices climbed on Wednesday as investors assessed the stability of a ceasefire between Iran and Israel, but held near multi-week lows on the prospect that crude oil flows would not be disrupted.

Brent crude futures rose 85 cents, or 1.3%, to $67.99 a barrel at 0341 GMT, while U.S. West Texas Intermediate (WTI) crude gained 87 cents, or 1.4%, to $65.24.

Brent settled on Tuesday at its lowest since June 10 and WTI since June 5, both before Israel launched a surprise attack on key Iranian military and nuclear facilities on June 13.

Prices had rallied to five-month highs after the U.S. attacked Iran’s nuclear facilities over the weekend.

“Global energy prices are moderating following the Israel-Iran ceasefire. The base case for our oil strategists remains anchored by fundamentals, which indicate sufficient global oil supply,” said JP Morgan analysts in a client note.

U.S. airstrikes did not destroy Iran’s nuclear capability and only set it back by a few months, according to a preliminary U.S. intelligence assessment, as a shaky ceasefire brokered by U.S. President Donald Trump took hold between Iran and Israel.

Earlier on Tuesday, both Iran and Israel signalled that the air war between the two nations had ended, at least for now, after Trump publicly scolded them for violating a ceasefire.

As the two countries lifted civilian restrictions after 12 days of war – which the U.S. joined with an attack on Iran’s uranium-enrichment facilities – each sought to claim victory.

“The Israel-Iran ceasefire is likely to prove fragile. But so long as both parties show themselves unwilling to attack export-related energy infrastructure and/or disrupt shipping flows through the Strait of Hormuz, we expect bearish fundamentals in the oil market to continue … from here,” said Capital Economics chief climate and commodities economist David Oxley.

Direct U.S. involvement in the war had investors worried about the Strait of Hormuz, a narrow waterway between Iran and Oman, through which between 18 million and 19 million barrels per day (bpd) of crude oil and fuel flow, nearly a fifth of global consumption.

Investors awaited U.S. government data on domestic crude and fuel stockpiles due on Wednesday. [EIA/S]

Industry data showed U.S. crude inventories fell by 4.23 million barrels in the week ended June 20, market sources said, citing American Petroleum Institute figures on Tuesday. [API/S]

(Reporting by Stephanie Kelly; Editing by Christopher Cushing and Sonali Paul)

On June 25, 2025, markets responded to the announcement of a ceasefire agreement between Israel and Iran by modestly lifting oil prices. Brent crude futures increased by $0.85, equivalent to 1.3%, while U.S. West Texas Intermediate (WTI) rose by 1.4%.

Despite this uptick, prices remain subdued—hovering near multi-week lows—as investors appear cautiously confident that energy flows, especially through the Strait of Hormuz, remain unaffected.

In the UK, benchmark Brent was reported at $67.14 (up $1, or +1.5%) earlier the same day, hinting at a price floor and a renewed sense of stability for the global energy market

The Middle East hosts critical oil chutes: even war talk between Iran and Israel can spike the risk premium built into oil futures. Recent tensions—including U.S. airstrikes and Iranian missile strikes—had flipped prices from under $70 to peaks of $81+ per barrel

The ceasefire, while fragile, reduces the likelihood of supply-side disruptions, prompting investors to temporarily ease risk premiums and allow prices to “find a floor” in the

Iran’s June 14 decision—warned by its parliament—to potentially close the Strait of Hormuz stirred market alarm lines, given it’s a chokepoint for ~20% of global oil flow

Should such a closure occur, OPEC commentary suggested prices could soar to $100–150/bbl

With the strait remaining open—despite threats—markets relaxed, though the highways of global crude remained under watch.

Oil traders are balancing geopolitical headlines with inventory fundamentals. API data shows a 4.23 million-barrel drop in U.S. crude stocks for the week ending June 20, providing near-term bullish support

Meanwhile, investors remain distracted by Monetary Policy: cautious Fed talks and global interest rate dynamics provided a backdrop to the risk sentiment .

Middle Eastern conflicts now trigger limited price swings—Brent only swung ~15% from under $70 to around $81 before stabilizing

Global supply is more diversified: U.S., Brazil, Canada output cushions regional supply shocks

OPEC+ still holds ~6.8 mb/d spare capacity, making targeted output policies an effective buffer

Morgan Stanley’s bull/bear outlook underscores this reality: while a bear scenario could see 75% YoY volatility, crippling the economy, the base case assumes geopolitical shocks will be short-lived .

Describes a “bear-case” where Brent breaches $120+ if Iran escalates, especially via disruptions in the Strait—a scenario deemed low-probability but impactful

Their base case remains constructive, citing historical stock-market rebounds post-conflict (on average +9% in 12 months).

JPMorgan warns oil could reach $130/bbl if Gulf supply falters

Apollo’s Torsten Sløk suggests rising oil threatens stagflation, reinforcing inflation even as growth weakens

Analysts universally agree: a peaceful de-escalation is bullish for equities, while resurgent violence is bearish for both markets and sentiment.

Initial signs are positive, but violations have already emerged. U.S. officials and Trump himself have flagged continued missile exchanges—signs this ceasefire remains highly fragile

No major disruption yet—but any Iranian decisions to block or attack maritime traffic could rekindle a geopolitical premium overnight .

c. Monetary Policy & Oil Fundamentals

Markets will closely monitor Fed communications, especially rate-cut timeline signals, which can sway markets independent of oil fundamentals .

Simultaneously, U.S. crude inventories, OPEC+ decisions, and spare capacity dynamics will dictate whether this price rise is enduring or fleeting.

Recent declines in oil and cooling conflict fears boosted risk assets: global stocks climbed (S&P 500, Nasdaq), while Treasury yields eased as inflation risk subsided

Central banks may now find more room to maneuver.

A sudden oil spike ramps up transportation and heating costs, introducing inflationary pressure even while the economic cycle softens—classic stagflation territory warned by analysts .

Governments (especially oil importers) must plan for budget impacts and potential consumer strain if prices rally beyond current levels.

That disruption doubled prices in a year due to a mere ~4% drop in supply, relying heavily on Middle Eastern logistics

Today, alternate supply from Western producers and diversified export routes have lessened the chokehold that Middle Eastern supply once had .

However, the Strait of Hormuz remains a vulnerability—any real blockade could reintroduce price volatility akin to 1979.

Oil Prices Surge 3% as Investors React to Iran-Israel Ceasefire Deal