Based on reporting by the Financial Times, US warplanes struck three Iranian nuclear facilities over the weekend—the first direct American military action on Iranian territory. This sharp escalation has raised urgent concerns about potential Iranian retaliation targeting regional energy infrastructure or shipping lanes in the Strait of Hormuz.
U.S. Enters the Fray Following Israeli Strikes
On June 22, 2025, U.S. aircraft, including B‑2 stealth bombers and submarines, bombed Iran’s Fordow, Natanz and Isfahan nuclear sites—a mission code‑named Operation Midnight Hammer. President Trump described it as “a very successful attack” and warned Iran that further military strikes would follow if Tehran did not “make peace”.
This marks a critical transition from indirect conflict—until now, only Israeli forces had struck Iranian targets—to full U.S. military involvement. As Jorge León, head of geopolitical analysis at Rystad Energy, put it, “A clear red line has been crossed”.
Oil Prices Surge on Weekend Escalation
Ahead of markets reopening late Sunday UK time, analysts widely expect crude prices to open significantly higher. Even without immediate Iranian retaliation, the new geopolitical risk premium is already inflating prices.
Brent crude closed Friday around $77/barrel, up approximately 10% since Israel’s initial strikes ten days ago. Despite this rise, supply remained intact, with Brent briefly peaking at $79 on Thursday. After the U.S. strikes, prices flirted with a five‑month high, with Brent reaching roughly $81.40 in Asian trading before settling back near $78.
All Eyes on Iran’s Next Move—and the Strait of Hormuz
The market is now awaiting Iran’s response. Tehran’s parliament has backed a potential blockade of the Strait of Hormuz, though full execution requires approval from top security officials.
Around one third of global seaborne oil—roughly 21 million barrels per day—passes through this narrow choke‑point via Iran, Iraq, Kuwait, Saudi Arabia, Qatar and the UAE. Any disruption to traffic here could send oil prices skyrocketing: some analysts suggest a blockade could push Brent above $100, even up to $120–$130 per barrel.
Retaliation Scenarios and Market Supply
Analysts are considering multiple retaliation paths:
- Direct attacks on U.S. assets or shipping: Iran could target the U.S. Fifth Fleet or use proxies to strike regional oil infrastructure.
- Blockade or disruption in Hormuz: Though Iran has signalled intent, experts warn a sustained closure would harm its own exports and may be logistically difficult.
- Targeting Gulf allies: Oilfields or pipelines in Saudi Arabia and Qatar could become targets, putting pressure on key producers—who are already pushing for de-escalation .
S&P Global analysts predict prices will surge Sunday but stabilise by Monday absent an immediate Iranian response.
Market Resilience and Economic Implications
Despite short-term volatility, global supply remains balanced—Opec+ has ramped up production, inventories are healthy, and Iranian crude (approx. 2 million barrels per day) remains in circulation.
Still, sustained escalation could derail calmer market conditions. Economists warn that sharply higher oil prices feed into broader inflation, raise fuel costs, slow economic growth, and complicate central bank rate plans.
Financial markets have shown mixed reactions. Oil moved sharply initially, then stabilised. Stock markets dipped slightly; safe‑haven assets like gold and the US dollar strengthened.
