Oil prices just took a serious tumble, thanks to a surprising twist in Middle East geopolitics.
On Tuesday, Brent crude fell over 6% to $67.14 a barrel, while WTI dropped to $64.37, marking the lowest levels in about two weeks. The reason for this is that a fragile ceasefire between Israel and Iran has temporarily cooled fears of a wider conflict that could threaten global oil supply.
For nearly two weeks, oil traders had priced in a “geopolitical risk premium” after Israel’s surprise strike on Iranian military and nuclear sites on June 13.
Fears skyrocketed that the conflict might spiral out of control, possibly jeopardizing oil transport routes like the Strait of Hormuz, the world’s most critical oil chokepoint.
But with a ceasefire on the table (even if shaky), the market’s anxiety has eased fast.
Before you breathe easy, remember that this truce isn’t exactly bulletproof. Just hours after the announcement, President Trump accused both Iran and Israel of violating the agreement. That said, traders still see less immediate risk of oil supply disruptions, for now.
Interestingly, Trump also gave China the green light to continue buying Iranian oil, a move that further pressures prices by opening up more supply channels.
Let’s rewind quickly: after U.S. airstrikes on Iran last weekend, oil prices spiked to 5-month highs. Then Iran fired back, but in a “measured” way. It hit a U.S. base in Qatar, which markets interpreted as a de-escalation rather than a full-blown escalation.
Cue the sell-off: Oil plunged 7% on Monday, and another 6% on Tuesday.
That is a 13% drop in just two trading days.
As if the Middle East weren’t enough, global supply stories are also weighing on oilKazakhstan raised its 2025 production forecast at the Tengiz oilfield to 35.7 million metric tons, up from 34.8 million, and Guyana pumped up output in May to 667,000 barrels per day, up from 611,000 in April, driven by ExxonMobil’s ramp-up.
Add that to rising production across several OPEC+ countries, and you’ve got a recipe for oversupply.
Meanwhile, in the U.S, consumer confidence took a hit in June as Americans grew jittery about job prospects and the ripple effects of Trump’s tariff policies.
Fed’s John Williams is forecasting slower growth and higher inflation, not great for oil demand.
U.S. oil stockpiles might finally be dropping, and analysts expect a draw of 800,000 barrels, the fifth straight weekly decline. But it’s still far less than seasonal averages.
At the moment, this is a bearish signal. Between geopolitical cooling, rising global output, and economic uncertainty, there’s downward pressure all around.
However, this market is far from stable. If the Israel-Iran ceasefire collapses or tensions flare again in the Strait of Hormuz, oil could shoot right back up.
