Oil jumps as traders fear supply disruption amid Israel-Iran conflict

Commodity

Middle East Situation

Summary:

Oil prices surged amid fears of supply disruption from the Israel-Iran conflict, while gold dipped on profit-taking despite geopolitical risks. Investors await Fed and BoE decisions, keeping currencies and equities cautious.

Oil (BZ=F, CL=F)

Oil prices jumped during a volatile trading session amid mounting concerns that Iran could target regional energy infrastructure or shipping lanes, particularly the strategically vital Strait of Hormuz

Brent crude futures gained 0.9% to $73.92 a barrel at the time of writing, while West Texas Intermediate futures went up 1.5% to $72.83 a barrel, adding to oil’s 7% surge on Friday.

The conflict in the Middle East flared on Friday after Israeli forces struck Iranian nuclear facilities and missile sites, raising the spectre of a broader regional confrontation.

Lazard Geopolitical Advisory (LGA) warned that a temporary disruption of the Strait could have severe market consequences.

“A temporary disruption of the Strait of Hormuz, a key transit chokepoint for 30% of seaborne oil and 20% of LNG, could push oil prices upwards of $120 per barrel and would likely require US direct involvement to secure safe passage for energy flows,” the advisory firm said in a note.

Even in the absence of a formal closure, LGA cautioned that “oil markets will see continued volatility as the risk of a disruption evolves.”

“The conflict between Iran and Israel is still fresh and brewing, and investor sentiments may still be holding on to the 'war risks',” said Priyanka Sachdeva, senior analyst at Phillip Nova. “Added volatility and caution ahead of the Fed policy decision are further ensuring higher-paced price reactions in oil.”

Analysts at ING noted that while a loss of Iranian supply could significantly tighten balances in the months ahead, global producers may have the capacity to respond.

“The loss of Iranian oil supply would wipe out the surplus that was expected in the fourth quarter of this year,” they wrote. “However, OPEC sits on 5m b/d of spare production capacity, and so any supply disruptions could prompt OPEC to bring this supply back onto the market quicker than expected.”

Pound (GBPUSD=X, GBPEUR=X)

The pound traded broadly flat against both the US dollar and the euro on Monday as investors exercised caution ahead of key monetary policy announcements from the Federal Reserve and the Bank of England later this week.

Sterling held steady at $1.3500 against the dollar, while it was unchanged against the euro at €1.1735 at the time of writing.

The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, rose 0.2% to $98.18.

Market participants are bracing for back-to-back central bank meetings, with the Fed set to announce its decision on Wednesday, followed by the BoE on Thursday. While both institutions are widely expected to keep interest rates on hold, investors will be focused on the forward guidance and commentary accompanying the decisions.

Fed officials have signalled that the current policy rate of 4.25% to 4.5% is likely to remain in place for an extended period, as they assess the implications of Trump’s latest economic measures. Policymakers have cautioned that the administration’s policies could have inflationary effects, complicating the outlook for rate cuts.

On this side of the Atlantic, the BoE is similarly expected to maintain its benchmark rate at 4.25% as it contends with persistent inflation, rising geopolitical risks, and mixed economic signals at home.

Gold (GC=F)

Gold prices eased in early European trading on Tuesday as investors weighed growing uncertainty in the Middle East and a fluid geopolitical backdrop.

Gold futures lost 0.4% to $3,404.20 per ounce at the time of writing, while the spot gold price slipped 0.8% to $3,386.63 per ounce.

"Market sentiment continues to swing between escalation and de-escalation regarding events in the Middle East, and these back-and-forth sentiment shifts are what is driving the gold price's moves either side of the $3,400 level," KCM Trade chief market analyst Tim Waterer said.

Gold, a traditional safe-haven asset during times of geopolitical and economic instability, has drawn strong inflows in recent weeks amid escalating global tensions. But analysts said some investors were now cashing in profits following a sharp rally in prices.

"There is enough prevailing uncertainty surrounding both tariff wars and actual wars to buttress the gold price and keep it within sight of a potential return to $3,500," Waterer said.

Markets remained on edge following reports that US president Donald Trump had asked the National Security Council to prepare in the situation room, having cut short his attendance at the Group of Seven summit in Canada.

Trump had earlier called for the immediate evacuation of Tehran and reiterated his long-held position that Iran should have signed a nuclear deal with the United States.

In equities, the FTSE 100 (^FTSE) was lower, down 0.5% to 8,828 points at the time writing. For more details, check our live coverage here.

Source : finance.yahoo

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Michelle

Economic

Forex

US retail sales fell by the most since the start of the year in May, suggesting new tariffs deterred consumers from spending, especially on cars.

The value of retail purchases, not adjusted for inflation, decreased 0.9% after a downwardly revised 0.1% decline in April, Commerce Department data showed Tuesday. Excluding autos, sales fell 0.3%.

Seven of the report’s 13 categories posted declines, restrained most by building materials and motor vehicles — which came after a buying spree in anticipation of tariffs. Spending at restaurants and bars, the only service-sector category in the retail report, fell by the most since early 2023.

After loading up on purchases for cars and other goods to front-run President Donald Trump’s tariffs, the figures suggest consumers are now pulling back spending. While the duties so far haven’t boosted US inflation, consumer sentiment is still shaky and household finances have worsened amid a persistent rise in the cost of living and high interest rates.

While the administration made a trade deal with China this month and talks continue with other counties, Trump said last week he may raise US auto tariffs “in the not too distant future” and is looking to set unilateral tariff rates in the coming weeks. A poll conducted for Bloomberg News last month showed three in five respondents reported cutting back due to concerns around a potential recession, largely on services like dining out and entertainment.

Source: Bloomberg Europe

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Adam

Stocks

Middle East Situation

Flaring tension in the Middle East is adding to worries over inflation and the timing of US interest-rate cuts, prompting at least one Wall Street firm to turn cautious on the prospect of the stock market’s climb toward another all-time high.

Even as the S&P 500 Index rose Monday on hopes the conflict between Iran and Israel won’t spill over into a broader war, the trading desk at JPMorgan Chase & Co. shifted away from its tactically bullish view on US stocks, citing growing risks and the greater likelihood of a retreat.

“While there has been a strong buy-the-dip mentality with investors having been rewarded for fading negative news this year, we think it’s best to pull back on risk,” said Andrew Tyler, JPMorgan’s head of global market intelligence, who correctly predicted a multi-week stock rally back in April through this point. “Positioning indicates that irrespective of Israel-Iran, the market was setting up for a pullback,” he told clients early Monday.

Evidence is emerging that the risk-on momentum that has propelled the S&P 500 to a 21% gain from its April trough is hitting a rough patch. The gauge has been sitting near the 6,000 level for a month, while the stock market’s so-called fear index, or VIX, is hovering just below 20, showing continued investor angst over geopolitical developments and other risks.

Tyler’s latest call may have come before the market bounce following Friday’s slide, but others like Matt Maley, chief market strategist at Miller Tabak + Co. agree. He notes that even if the S&P 500 retests its all-time high, the downside risks are higher than upside potential at current valuation levels. The benchmark is 1.8% away from a record.

“Economic growth is still slowing, earnings forecasts are still dropping,” Maley said. “When you throw in geopolitical uncertainty, it’s not a good mix.”

Intensifying conflict in the Middle East comes at a time when the US equity market is already grappling with a bevy of crosscurrents. While data has pointed to economic resilience in spite of tariffs, and trade tension between the US and China seems to be easing, valuations have edged back toward levels seen in the first quarter. Also, Federal Reserve policymakers insist they’re in no rush to lower borrowing costs.

In a sign that investors have worries about an already-stretched market, the S&P 500 has barely budged in five trading sessions, posting a muted reaction to last week’s positive consumer and producer price index reports.

Over at Evercore ISI, US chief equity and quantitative strategist Julian Emanuel warns of potential volatility into the summer, with active managers likely to offload stocks in order to protect near-term profits given all the uncertainty from trade and geopolitics.

“Today’s dip buying is based on the belief that the Iran situation will be remediated rapidly,” he said. “That is not likely to be the case, and even if it were the case, there are a number of other overhanging issues.”

With stocks trading at more than 23 times Evercore’s 2025 earnings estimate, he added that investors are already pricing in the prospect of positive geopolitical resolutions without any real proof.

Source: Bloomberg

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Glendon

Commodity

The specter of an Israeli attack on oil producer Iran has haunted crude markets for decades — but now that it’s finally arrived, prices seem oddly subdued.

True, futures saw their biggest surge in three years when Israel launched airstrikes June 13. But despite five days of hostilities, the US benchmark’s gains have stalled near $73 a barrel.

When oil hit record levels approaching $150 in 2008, it was driven in part by fears over an Israeli military training exercise. Traders appear less perturbed by the real thing.

This insouciance partly reflects the lack of disruption to facilities and exports, and the perceived improbability of extreme scenarios such as a closure of the critical Strait of Hormuz.

It’s also a matter of experience.

When the two adversaries exchanged missile fire a year ago, crude traders similarly held their nerve, refusing to be spooked while regional flows continued unabated.

Furthermore, oil markets have been toughened by an array of crises, from the 2019 drone attack on Saudi Arabia’s Abqaiq processing plant to sanctions on Russia following its invasion of Ukraine.

But two reports published today by the International Energy Agency — the watchdog of consuming nations — illustrate the deeper dynamics at play.

In its latest monthly update, the IEA noted that, unless the crisis strikes exports, “oil markets in 2025 look well supplied” as demand cools and OPEC+ ramps up production. World inventories ballooned by 1 million barrels a day in recent months, it said.

More importantly, the agency’s annual medium-term outlook reaffirmed that surplus conditions are set to persist for the rest of this decade.

Consumption in China, the engine of demand growth this century, is set to peak in 2027, a few years earlier than previously expected, as the country pivots more toward electric cars.

Meanwhile, oil supplies will continue swelling even as America’s shale boom fades, amid growing output in Brazil, Canada and Guyana, it said.

In short, crude traders’ calm amid the Persian Gulf turmoil fits the industry’s shift to an era of plenty.

Tanker rates for vessels carrying refined oil products from the Middle East surged as missile strikes between Israel and Iran made hauling fuel through the Strait of Hormuz more risky. The cost to ship fuels to East Asia climbed almost 20% in three sessions, according to data from the Baltic Exchange. Rates to East Africa jumped more than 40%.

Oil fluctuated between gains and losses as traders parsed comments from US President Donald Trump on the Middle East conflict. A gauge of market volatility is the highest since 2022.

Two tankers collided off the United Arab Emirates and caught fire, rattling oil and shipping markets that are monitoring navigation in the region. The incident is apparently unrelated to the Israel-Iran fighting.

US Senate Republicans released a bill to end tax credits for wind and solar in 2028 — years earlier than those for other clean-energy sources such as nuclear, hydropower and geothermal.

Gold is expected to sink below $3,000 an ounce in the coming quarters as a record-setting run peters out, Citigroup Inc. said, calling time on one of the standout rallies in commodities.

The US Strategic Petroleum Reserve is half empty after being used like an ATM, and Republicans are budgeting a fraction of the money needed to refill it, Bloomberg Opinion’s Javier Blas writes.

Global passenger jet fuel demand for June 17-23 will rise 1.1% week-on-week, reaching about 7.13 million barrels per day, BloombergNEF projects. This reflects growth of 3.9% year-on-year, based on schedules and implied demand derived from Bloomberg Terminal data. BNEF expects an increase across all regions except Sub-Saharan Africa. North America will lead the gains with about 21,800 barrels per day.

Source: Bloomberg Europe

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Michelle

Economic

Forex

Keir Starmer stooping to recover the latest iteration of the UK’s trade agreement with President Donald Trump was an awkward symbol of the current shape of the negotiations. The deal must continually be dealt with. And the British prime minister will have do most of the bending.

The papers that slipped from Trump’s hands — a fumble he blamed on the wind on the sidelines of Group of Seven meetings in Kananaskis, Canada — give the UK something that has eluded other trading partners: a signed document promising preferential relief from US tariffs.

But even those reduced rates remain far above the levels British goods enjoyed before Trump’s return to office. And key elements such as a 25% tax on steel and aluminum remain subject to potentially difficult negotiations about the origins of materials.

Trump further complicated British efforts to make the most of a relative win, when he mistakenly described the deal as a “trade agreement with the European Union,” the bloc that the UK left five years ago. If the remark surprised Starmer, he didn’t let it shake the smile from his face.

“This a very good day for both of our countries, a real sign of strength,” Starmer said.

“Great people, great people,” Trump replied, pointing at Starmer.

More than three months after Trump and Starmer announced talks on a “new economic deal,” which the British side said would be focused on technology and AI, the discussions continue to morph with Trump’s evolving trade agenda.

Unveiled in hastily arranged speakerphone briefings in May, the first version of the agreement was immediately followed by questions about what it would take to remove elevated tariffs already then being paid by importers of British cars and metals.

Steel Quotas

The latest version, signed by both leaders to give it an added gloss of formality, committed them to measures to ease the trade of cars, agricultural and aerospace products. But it again fell short of an immediate cut to steel tariffs. Instead, the US agreed to exempt UK metals up to a certain quota that has not yet been set.

The UK in turn committed to “working to meet American requirements on the security of the supply chains of steel and aluminum” including on the “nature of ownership” of relevant steel plants.

That raises thorny issues for both of the UK’s main steel manufacturers: the Chinese-owned British Steel and the Indian-owned Tata Group, the latter of which can’t for the moment meet American requirements for its products to be entirely “melted and poured” in Britain.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

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Glendon

Cryptocurrency

US spot Bitcoin exchange‑traded funds (ETFs) recorded $412.2 million in net inflows on June 16, extending their streak to six days and pushing total cumulative inflows to $46.04 billion.

The six-day run of inflows began on June 9 and has now absorbed over $1.8 billion in capital, according to data from SoSoValue. The run has continued despite escalating geopolitical tensions, including renewed conflict between Iran and Israel.

Daily contributions included $386.27 million on June 9, followed by a $431.12 million surge on June 10. Despite a slight dip mid-week, inflows rebounded sharply with $322.60 million on June 13 and the most recent $412.20 million on June 16.

Total net assets across all US Bitcoin (BTC) ETFs have reached $132.50 billion, now representing 6.13% of Bitcoin’s total market cap. Trading volume remained strong as well, with $3.12 billion in value exchanged on June 16 alone.

Spot Bitcoin ETF Inflows. Source: SoSoValue

BlackRock’s IBIT leads the charge

BlackRock’s iShares Bitcoin Trust (IBIT) led the charge, which recorded a $266.60 million net inflow on June 16 and has now accumulated $50.03 billion in total.

Fidelity’s FBTC followed with $82.96 million, while Grayscale’s GBTC lagged behind with just $12.84 million and still shows a net outflow of $23.23 billion since inception.

“Despite rising tensions between Israel and Iran, institutions are looking past short-term volatility and focusing on long-term positioning,” Vincent Liu, chief investment officer of the Taiwan-based company Kronos Research, told Cointelegraph, adding:

“Steady Bitcoin ETF inflows reflect growing trust in BTC’s resilience, accessibility, and role as a hedge in a shifting macro environment.”

Bitcoin dips, but market structure holds

The unexpected Israeli strike on Iran on June 13 triggered a market sell-off, pulling Bitcoin down over 7% and ending the week in negative territory.

Under the hood, metrics showed signs of capitulation, Bitfinex analysts said in a June 16 report. They noted that Net Taker Volume hit a multi-week low at –$197 million, indicating aggressive selling.

“This selling, however, combined with a spike in liquidations, resembles past capitulation-style setups that often mark local bottoms,” the analysts said.

They added that if Bitcoin manages to hold the $102,000–$103,000 zone, it may suggest that selling pressure is being absorbed and that the market could be primed for recovery.

Source: CoinGecko

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Gerik

Economic

Commodity

IEA’s Outlook for Global Oil Demand

The IEA maintains its forecast that global oil demand will peak at 105.6 million barrels per day (bpd) by 2029, with a slight decrease in 2030. Global oil production capacity is expected to rise by over 5 million bpd to 114.7 million bpd by 2030, ensuring ample supply as long as major geopolitical disruptions do not occur. Despite geopolitical risks, such as the ongoing Israel-Iran conflict, the IEA believes the market will remain well-supplied, with oil prices increasing to above $74 per barrel recently due to tensions in the Middle East.

For China, which has been the largest contributor to global oil demand growth for decades, the IEA predicts a shift in the country's consumption patterns. As China embraces electric vehicles and increases its use of natural gas-powered high-speed rail and trucks, oil consumption is expected to peak in 2027. The IEA notes that China’s total oil demand in 2030 will be only slightly higher than in 2024, a stark contrast to previous projections of substantial growth. This is primarily due to the rapid rise in electric vehicle sales and the country’s economic challenges.

U.S. Demand Forecast Adjusted Upward

In contrast to China’s decline in demand, the United States, the world's largest oil consumer, is expected to see oil demand grow due to slower EV adoption and cheaper gasoline. The IEA has adjusted its forecast for U.S. oil demand in 2030 upward by 1.1 million bpd, based on lower-than-expected EV adoption rates. While the U.S. is projected to have 20% of its car sales come from electric vehicles by 2030—down from last year’s forecast of 55%—this slower transition has led to increased oil demand in the country.

While the IEA’s forecast suggests that the world oil market will remain adequately supplied through 2030, geopolitical tensions, particularly in the Middle East, could lead to unexpected disruptions. The recent surge in oil prices, driven by the Israel-Iran conflict, highlights the volatility in the market. The IEA continues to monitor such risks, which could significantly impact oil supply security in the coming years.

Global oil demand is projected to grow until the end of the decade, despite China’s anticipated peak in 2027, driven by slower EV adoption in the U.S. and lower gasoline prices. While supply is expected to rise and remain sufficient through 2030, geopolitical instability poses ongoing risks to the oil market. The IEA’s outlook reflects a complex interplay of economic, technological, and geopolitical factors that will shape the future of global oil consumption.