Oil sells off as traders calmly look beyond the bombs in the Middle East
[June 24, 2025] By
BERNARD CONDON
NEW YORK (AP) — If oil prices are any measure, Iran just flinched.
The price of oil tumbled Monday afternoon in an historical move as
traders bet that Iran's decision to bomb a U.S. base in Qatar signaled
it was not planning to do the one thing that could really hurt America:
Shut down the flow of oil by attacking crude shipments.
“When the response comes and it is muted, oil drops,” said Tom Kloza,
chief market strategist at consultancy Turner Mason & Co, calling the
limited Iran response far short of what many traders feared. “This
rivals some of the historic selloffs.”
There's still plenty Iran could do to push prices back up, and the
markets could be getting it all wrong, But oil analysts say there are
plenty of reasons fear has receded.
Adding to the odds that prices will settle, President Donald Trump
announced that Israel and Iran had agreed to a complete ceasefire,
though the situation remained unclear.
Scary then calm
The price of West Texas Intermediate, the U.S. benchmark, fell 7.2% to
$68.51 per barrel in regular trading on Monday after Iran announced a
missile attack on Al Udeid Air Base in Qatar, which the U.S. military
uses. Traders were relieved because Iran said it had matched the number
of bombs dropped by the U.S. on Iranian nuclear sites this weekend, a
possible sign of a desire to deescalate the conflict.
The price of oil fell further after Trump's announcement of a “complete
and total ceasefire” to be phased in over 24 hours. Oil fell almost 4%
to $65.84 a barrel early Tuesday, and is now below where it was before
fighting between Iran and Israel began over a week ago, when a barrel of
U.S. crude was just above $68.
Markets were initially nervous Sunday as oil futures opened for trading.
The price of Brent crude, the international standard, had jumped 4% as
traders anxiously watched the Strait of Hormuz, a waterway on Iran's
southern border that legislators in Tehran were demanding be closed in
retaliation. That would have walloped the global economy because much of
world’s crude and liquified gas passes through it.
Brent crude was trading at $68.06 per barrel, down 3.5%, early Tuesday.
That's good news for Trump, who wants the Federal Reserve to stop
worrying about inflation and start cutting interest rates. It's also
good for motorists this summer if the trend holds.
Drivers were already paying higher prices at the pump before the U.S.
attack. The average price nationwide is $3.18 per gallon, according to
GasBuddy surveys, about 10 cents more than two weeks ago.
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In this Jan. 19, 2012 file photo, fishing boats are seen in front of
oil tankers south of the Strait of Hormuz, offshore the town of Ras
Al Khaimah in United Arab Emirates. (AP Photo/Kamran Jebreili, File)
 ‘It would be suicidal’
Some traders doubted Iran would try to close the Strait of Hormuz
even before its limited attack Monday. Much of country's own crude
passes through the waterway — 1.5 million barrels a day — and oil is
a big revenue generator for the country that they would be loath to
disrupt.
“It's a silly notion that the Iranians would look to do that,” said
Kloza. “I’ve been covering oil for 50 years and we've never seen the
Strait of Hormuz compromised.”
Asked about the prospect of a shutdown on NBC's “Meet the Press”
Sunday, Vice President J.D. Vance put it more simply: “I think that
would be suicidal.”
At current oil prices, Tehran receives roughly $40 billion in
revenue annually from oil transiting the same waters. That is a
tenth of what the entire of country produces in goods and services.
Yes, but
Andy Lipow, an Houston based oil analyst, says history suggests Iran
won’t disrupt its own flow of oil, but that countries, like people,
don’t always act in their economic interests.
“The question for the oil markets is, ‘Is his time different?’,” he
said. “You might have an emotional decision.”
He notes also that Iran has other ways to push oil higher without
completely closing off the waterway.
Iran could jam navigational devices, slowing transit, or drop mines
in the water, forcing the U.S. Navy to do more escorts. Or it could
bomb a tanker, he said, sending the premiums that shippers need to
pay insurers sky high.
Big gamble
If traders are wrong and oil shoots back up, the impact could be
widely felt.
A surge in oil prices would come at a bad time. Trump insists that
the inflation scare is largely over, but many economists think
higher prices are still coming because the full impact of his
tariffs are only now beginning to show up on everyday goods.
Trump is clearly aware things could change fast.
“To The Department of Energy: DRILL, BABY, DRILL!!! And I mean
NOW!!!” he wrote on Truth Social Monday, adding. “EVERYONE, KEEP OIL
PRICES DOWN. I’M WATCHING!”
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