Iran’s Decisions Will Determine the Future of Oil Prices

Following the U.S. bombings, the market anticipates a clear but likely temporary rise in oil prices on Monday morning (23.06.2025). Kpler remains cautious, estimating an increase of up to $8-10 per barrel, pushing Brent oil into the range of $85-$87 from $77 on Friday. According to the company, this rise won’t last unless tensions escalate further. All eyes are now on Iran and its upcoming decisions. The decision-making process in Iran is heavily influenced by ideological filters, as American involvement fundamentally changes the nature of the conflict. Anti-Americanism isn’t just a slogan in Iran; it’s a core principle of the regime since the 1979 revolution. Thus, the government cannot easily ignore U.S. attacks without risking its legitimacy. Consequently, attention shifts to both short-term and long-term reactions from Tehran and their impact on energy markets, especially oil. If Iran strikes back at U.S. targets or if the U.S. and Israel hit Iranian oil installations, the Hormuz Strait could be threatened. Currently, actions from all sides suggest efforts to avoid such scenarios. Some tankers have already turned away from the strait. Greece’s HELLINiQ Energy stated that no ships will be sent to Iraq for oil pickup. Environment and Energy Minister Stavros Papastamou emphasized Greece’s diversified energy mix but acknowledged global instability impacts everyone. Analysts believe an OPEC crisis would spike prices temporarily, with initial rates exceeding $100 before stabilizing higher than recent months. Saudi Arabia and UAE have increased exports by 870,000 barrels/day recently. OPEC holds a production buffer of about 6 million barrels/day to cover potential Iranian export losses. Long-term, China would suffer significantly if Iranian oil is disrupted, losing cost advantages. Prolonged conflict without resolution could institutionalize geopolitical premiums in oil prices due to persistent threats around the Hormuz Strait. Additionally, Yemen’s Houthis remain a key threat within Iran’s network, as seen in the 2019 Saudi Aramco drone attack halting half of Saudi production.