Persian Oil Trap: Sneaky Strategy for Oil Extraction
Powerful aerial and covert attacks by Israel on nuclear, defense, and even civilian targets in Iran have been echoing for a week now, along with retaliatory rocket attacks by Tehran. Both countries are reeling from losses and destruction. Several energy facilities have been damaged, even though oil prices seem reluctant to soar.
Prices fluctuate, sometimes rising, other times sliding back. On June 20, a barrel of Brent on the London ICE Future exchange was trading at $77.2, while the night before, it was selling for $78.85. Traders claim the market has already factored in the potential impacts of Israel's aggression on prices. The collapse of global supply and a catastrophic increase in oil prices is only possible if the Strait of Hormuz, through which 26% of global oil consumption is transported, is closed.
War over Diplomacy
The primary targets of the Israeli Air Force and the Mossad divers are the Iranian facilities where uranium is enriched, such as those in the city of Natanz. These ground structures appear to have been completely destroyed, but as we know, 60% of enrichment capacity is buried 60-80 meters beneath rock formations around the city of Fordo. Israeli bombs cannot reach them. Therefore, according to western media reports, Israeli Prime Minister Benjamin Netanyahu is trying to convince U.S. President Donald Trump to use a 14-ton penetrating bomb against the Fordo nuclear facility, capable of penetrating 65 meters of rock during testing, dropped from an American strategic bomber B-2.
However, attacks from the air and ground by Israeli raiders target a wide spectrum of Iranian targets: anti-aircraft defense systems, ballistic missiles, government, and military bunkers. Already, the leadership of the military, the Revolutionary Guards Corps, 19 (Israeli sources) nuclear physicists, and their families have been killed. The IDF hasn't disclosed how many children of nuclear physicists were killed. There is a hunt for Ayatollah Ali Khamenei. The Israeli government does not conceal that its goal is not limited to the elimination of the Iranian nuclear project, which is believed to be on the verge of producing an atomic bomb, but to overthrow the current Iranian ruling regime.
And, judging by recent announcements from West Jerusalem, the attacks on Iran are not expected to cease in the near future. They plan to bomb until the regime of the ayatollahs capitulates.
These military actions are costing Israel heavily. Experts at the Institute for Economic Policy at the University of Reichman estimate that Operation "People Like Lions" could cost Israel up to $200 million per day. If the military campaign lasts a month, it will cost the government approximately $12 billion. It should be noted that Israel's GDP in 2024 was $540 billion. That means a month of fighting would be a loss of 2% of the GDP.
However, these are only direct military costs. If the population of Israel spends an unknown amount of time away from their workplaces in bomb shelters during the conflict, economic losses could be much higher.
In Iran, it is understood that a way out of the devastating confrontation can only be achieved through diplomatic means. Iranian Foreign Minister Abbas Aragchi discussed the situation at the initiative of the American side with Special Presidential Envoy for Iran Steve Whitkopf. On June 20, Aragchi met in Geneva with foreign ministers of the so-called "European Troika" (England, Germany, and France), who, together, drafted the Iran nuclear deal in 2015. Representatives of the European Union also attended the meeting.
Details are unknown. However, Iranian President Masoud Pezeshkian stated during the Geneva talks that war can be stopped without any conditions, but with guarantees that Israel will not engage in any further adventures.
It is reported that Donald Trump is following the Geneva talks. Therefore, according to Presidential Spokeswoman Kayleigh McEnany, Trump has taken a two-week break to decide on direct involvement in the Middle East conflict. However, there are reports that American bombers are ready for action.
Guns over Oil
Israeli aggression inevitably puts the global oil market at risk. The reason is that in 2024, oil deliveries from countries in the Persian Gulf (Trump, incidentally, during his visit to Saudi Arabia and Qatar in May, renamed it the Arabian Gulf) accounted for 26% of global oil exports. LNG - 20%. The exit from the large Persian Gulf in the Arabian Gulf and, in general, in the Indian Ocean passes through the strategically narrow Strait of Hormuz, which can be easily blocked by the Iranian Navy.
Then - the collapse of the global oil market. A massive deficit in the supply could result in the doubling of current oil prices. Even in Iraq, the price of a barrel has reached 300 dollars.
However, it can be said with confidence that, for now, the Strait of Hormuz is safe. At least from potential U.S. air attacks on Iran.
But energy facilities in Iran, and conversely in Israel, are already experiencing attacks.
For example, on June 14, Israeli fighters attacked the South Pars gas field, from which Iran obtains two-thirds of its fuel, as well as a gas-refining plant. Next, the largest refinery in Tehran was burned down, with a capacity of 260 million liters of gasoline, diesel, and aviation fuel, and located to the south of the capital, another oil refinery with a capacity to process nearly 225,000 barrels per day was also damaged.
In response, Iran attacked a Haifa refinery with a capacity of 197,000 barrels per day, putting it out of service.
Despite this, oil prices are behaving cautiously. As if no one is fighting around them.
On June 11-12, the day before the Israeli attack, the benchmark oil price was at $69.77-$69.36 per barrel. A week ago, oil prices were trading within the range of $64-$65. The rise was due to the results of the U.S.-China trade agreement, which resolved tariff issues and removed obstacles to shipments of Chinese rare-earth metals.
The strikes on Iran on June 13 drove prices up to $74.2 per barrel. Urals rose to $62-$64. For comparison, according to data from the Russian Ministry of Economic Development, the average price of Urals dropped to $52 per barrel in May.
On June 14, prices stabilized. On the 15th, they rose to 75.65. But on the 16th, they fell to 73.23. Then they started to climb again. On June 17, they were above 76 per barrel. On June 19 (when rumors of potential U.S. intervention increased), they were $78.85. On June 20, when Trump supposedly paused for decision-making, prices fell back to $77.2 per barrel.
As a result, over the course of a week from June 13 to June 20, oil prices increased by only about 11%. And this in conditions of large-scale military action just a few miles from tanker routes and production facilities.
It's just another oil miracle. But it looks that way on the surface. The fact is that oil traders have been taking into account the potential escalation of the situation around Iran since last year. It should be noted that Iran has been under western sanctions for a long time, and in 2015, after the conclusion of the nuclear deal, it was promised that they would be softened. And, in fact, in 2016, Iran increased the production and export of raw oil and oil products. But in 2018, Trump revoked the deal, and new oil sanctions were imposed on Iran in 2019. The European Union, India, and several other buyers rejected Iranian oil. Iran's customers, apart from Chinese "teapots" - small independent refineries that account for about 20% of the internal demand for oil products, remain unknown.
In this year, Iran's oil and gas condensate production amounted to 3.117 million barrels per day, according to BP data. Export, especially raw oil, is even lower. As a result, Iran's share of the global oil supply offer on the world market does not exceed 1.6%.
According to the International Energy Agency, the oil market surplus in 2021 is about 1 million barrels per day - almost the same as the 1%. In other words, the Iranian gap in supply can be easily covered by deliveries from other countries.
In other words, as informed by Russian Deputy Prime Minister Alexander Novak at the PMEF-2025, the global oil market is balanced despite the increase in production more than mandated by OPEC+, including Saudi Arabia and Russia.
Market with Guns and Without Them
A significant deficit in the global oil market, and thereby a rise in prices to, for example, 130-140 dollars per barrel, is only possible in case of the complete closure of the Strait of Hormuz. Not a partial one. A few days ago, near Dubai, two tankers collided and caught fire. Prices did not plummet. Curiously, the reasons for the collision - the turning off of transponders for unknown reasons.
Another potential measure from the Iranian side in case of further escalation: an attack on tankers and oil facilities of neighboring countries. However, provoking dissatisfaction among Arab oil producers, and, of course, potential actions to block the Strait of Hormuz, are not politically advantageous for Tehran. The same goes for potential strikes on American military bases.
However, such actions could be a response to direct U.S. intervention. But Trump is unpredictable. He has a keen political sense. And, recently, he said he did not want to turn Iran into Libya.
If we talk about the oil market forecast without war, then on the first plan appears not a deficit (which could be exacerbated by the factors mentioned above), but demand.
In the latest IEA forecast, peak demand is expected in 2029 at 105.4 million barrels per day, which is slightly higher than this year's figure by only 2 million barrels. Electric cars are to blame for the disappointing future of oil producers, according to the agency.
However, OPEC Secretary-General Barkindo during the PMEF-2025 stated that the peak in oil demand, if it occurs at all, will not be before 2050 and will significantly exceed the current level. According to Barkindo's forecast, by 2030, demand will be significantly higher due to the emergence of 100 cities with a population comparable to that of St. Petersburg.
So, the global oil market can be balanced in favor of producers, including Russia, without war.
- Despite the ongoing military actions between Israel and Iran, oil prices have been behaving cautiously, remaining relatively stable over the past week.
- Iran's Foreign Minister Abbas Aragchi and Steve Whitkopf, Special Presidential Envoy for Iran, discussed the situation, indicating that Iran understands a way out of the devastating confrontation can only be achieved through diplomatic means.
