The escalation of tensions in the Middle East has raised market concerns about interruptions in Crude Oil Product supply, causing significant fluctuations in oil prices. While some investment banks warn that oil prices could soar to 90 dollars or even higher, others believe the situation is manageable and that oil prices will fluctuate in the Range of 70 to 80 dollars.
On Monday, Crude Oil Product futures jumped high at the market's opening, but then saw a decline. The main SC Crude Oil Product contract opened slightly higher, increasing over 7% intraday, before retreating to over 5%. The main fuel oil contract rose significantly, gaining over 3% during the day, and then falling back to more than 2%. The low-sulfur fuel oil (LU) main contract's increase also narrowed from nearly 2% to less than 1%. Following Israel's attack on Iran's energy facilities, the risks to supply in the Middle East have intensified, causing energy prices to continue rising. However, Zhuhui Futures believes that in the short term, both Israel and Palestine are likely to control the scale of the conflict, with oil prices fluctuating in the range of $70 to $80 per barrel.
Intense fighting occurred over the weekend in Israel!
The Iranian Ministry of Health reported that Israel's attacks since Friday have resulted in at least 224 deaths. Sources indicate that at least 14 Iranian nuclear scientists were killed in the Israeli attacks. Israel targeted Iran's missile launch facilities. Evacuation warnings have been issued for personnel around Iran's nuclear reactor and weapons factories.
Sources indicate that Israel's actions against Iran will continue for weeks and have the tacit approval of the United States. Senior U.S. officials confirm that Israel has the opportunity to eliminate Iran's Supreme Leader Khamenei, but Trump has explicitly opposed this action.
Netanyahu claims that intelligence shows Iran had planned to eliminate Trump. Iran intends to transfer nuclear weapons to the Houthis. If Iran abandons its nuclear program, Israel is willing to cease operations. Regime change could be one outcome.
Iran has launched dozens of missiles at Tel Aviv, Haifa, and other areas in Israel, marking a new phase of the "Real Promise-3" operation. An Israeli military spokesperson stated that further Iranian ballistic missile attacks on Israel are expected in the coming days.
Iran has informed mediators Qatar and Oman that it is unwilling to negotiate a ceasefire with Israel during the Israeli attacks. According to AXIOS, Israel is currently also not interested in a ceasefire as it has not achieved all its objectives.
Last Saturday, Israel launched an attack to strike at Iran's nuclear program, temporarily crippling gas processing facilities connected to Iran's largest gas field, South Pars, and targeting fuel storage tanks. Although this attack focused on Iran's domestic energy system rather than its international market exports, crude oil prices had already seen the largest single-day increase in three years last Friday, and traders and analysts are preparing for greater turmoil.
Trump hinted that the U.S. might engage in the war, but also stated that there is a high possibility for Israel and Iran to reach an agreement.
Reports last Saturday widely indicated that Israel requested direct military assistance from the U.S. to attack Iranian nuclear bases. Following this, Trump slightly shifted the tone from the White House in new comments to ABC News, now saying that America 'might get involved' in the conflict between Israel and Iran. He stated, 'We might intervene,' but emphasized that the U.S. military 'is not currently involved' in the conflict. He then called for a peaceful resolution to the conflict and expressed that the U.S. would hold an 'open' attitude towards Russian President Putin acting as a mediator.
However, local time on June 15, before departing to Canada for the G7 summit, President Trump expressed that he believes there is 'a great possibility' for Israel and Iran to reach an agreement, but also stated, 'Sometimes they need to have a fight.' 'I hope an agreement can be reached; I think it's time for an agreement, but we have to see how it goes,' Trump stated. 'But sometimes they have to fight.' He added, 'I believe the chances of reaching an agreement are very high.'
Trump also stated that the U.S. is 'getting along very well' with Iran and claimed, 'I think Israel and Iran respect each other very much.' However, when asked if he has requested Israel to pause its airstrikes against Iran, Trump declined to respond directly, stating, 'I don't want to say that.' This statement of 'let them fight' resembles his previous wording regarding the Russia-Ukraine war — he had compared the Russia-Ukraine conflict to 'two children fighting in the park,' suggesting that sometimes 'let them fight for a while before breaking it up is more effective.'
The volume of $80 call options surged dramatically.
The trading market also shows that traders are concerned about soaring oil prices. A large number of 'out-of-the-money call options' were traded, indicating that many are hedging against further increases in oil prices. The more heavily traded options are contracts that would profit if oil prices rise above $85 per barrel before June 25. The price ratio between call options and put options for Crude Oil rose to its highest level since March 2022, when the Russia-Ukraine conflict broke out.
Specifically, data from the Chicago Mercantile Exchange shows that on Friday approximately 33,411 contracts of WTI call options, expiring in August 2025 with a strike price of $80, were traded, while the total options trading volume reached 681,000 contracts, setting a record for the highest trading volume of such options this year. Previously, on January 10, a similar high trading volume had occurred, with 17,030 contracts of $80 call options expiring in February 2025 traded, totaling options trading volume of 301,866 contracts. As of the week ending June 10, speculators increased their net long positions in Crude Oil by 15,157 contracts to 121,911 contracts.
Citigroup believes that the rise in Crude Oil Product prices is mainly due to investors adjusting their positions, particularly short covering leading to short-term price fluctuations, rather than substantial changes in the fundamentals. Therefore, the tensions themselves may not be sufficient to sustain a continuous rise in oil prices. To drive prices further up, new long positions need to enter the market. This additional momentum for an increase will only appear if the situation undergoes a substantial escalation.
Supply and demand game: idle capacity vs. geopolitical risks
Despite the OPEC+ alliance claiming to have approximately 3.5 million barrels per day of idle capacity (mainly concentrated in Saudi Arabia and the UAE), analysts warn that the actual quickly releasable output may be far lower than the theoretical value, as Israel's airstrikes on Iran have raised concerns about potential widespread disruptions to Middle Eastern oil exports.
Iran currently produces about 3.3 million barrels of Crude Oil per day, with exports of crude oil and refined products exceeding 2 million barrels per day. Although the National Iranian Oil Refining and Distribution Company stated that its refining and storage facilities have not been damaged and continue to operate, the market remains concerned that escalating tensions could damage Iran's or its neighbors' energy infrastructure, thereby affecting oil supply.
Analysts point out that Iran may pay a heavy price for blocking the Strait of Hormuz, as about one-fifth of global oil consumption is transported through this strait, with approximately 18-19 million barrels of oil, condensate, and fuel passing through the channel daily. If shipping through the Strait of Hormuz is interrupted, it will have a significant impact on the global oil market. However, Goldman Sachs believes that the current geopolitical conflict has not yet affected key transportation routes such as the Strait of Hormuz, and the OPEC alliance has sufficient idle capacity to buffer potential supply risks.
The International Energy Agency (IEA) has stated that it is ready to release strategic reserves but has been criticized by OPEC for 'creating unnecessary panic'. The IEA indicated that if attacks by Israel on Iran lead to market shortages, it is prepared to release oil stocks. The IEA director pointed out that although the overall supply in the oil market is currently sufficient, the agency will take action when necessary. The IEA's oil security system holds 1.2 billion barrels of strategic and emergency oil reserves, which can provide a buffer in case of supply disruptions. However, the OPEC Secretary General stated that this statement 'triggered false alarms by repeatedly mentioning the unnecessary demand for potentially using oil emergency reserves, projecting fear in the market.'
Institutional differences: Goldman Sachs bears vs. investment banks warn of upside risks
Citi analysts believe that the current round of Crude Oil Product price increases is mainly driven by short covering, and unless the conflict expands into a regional war or there is an attack on Iran's energy infrastructure, further upside is limited. They expect that unless there is substantial escalation, such as direct attacks on energy infrastructure or broader regional conflicts, oil prices will struggle to maintain high levels.
Goldman Sachs reported that despite Israel's attacks on Iran, it assumes that there will not be a substantial disruption in Middle Eastern crude oil supply. Goldman Sachs expects that robust supply growth outside of U.S. shale oil will drive international oil prices downward, with Brent Crude Oil and WTI Crude Oil prices expected to fall to $59/barrel and $55/barrel respectively in the fourth quarter of 2025, and further decline to $56/barrel and $52/barrel in 2026.
Meanwhile, JPMorgan predicts that Brent Crude Oil prices could briefly spike to $90, but as Iranian oil supplies recover, prices may fall back to around $60. At the same time, ING Groep warns that in the worst-case scenario, oil prices could breach $120, and if supply disruptions continue until the end of 2025, they could even approach the historical high of nearly $150 from 2008.
Analysts are particularly concerned that sustained high oil prices could undermine the achievements the Federal Reserve has made in curbing inflation. JPMorgan believes that an oil price of $60 to $65 is a "comfortable range", and exceeding this price range could reverse the trend of declining inflation seen in the U.S. for several months and potentially impact the interest rate cut prospects anticipated by President Trump.
How do domestic Futures institutions view the outlook for oil?
Zhonghui Futures: In the short term, both sides are likely to control the scale of the conflict, and oil prices may fluctuate in the range of $70 to $80/barrel.
The escalation of the Israel-Iran conflict has raised market concerns about oil supply; however, the risk of supply disruption is relatively controllable. Although on June 15, Israel began selectively attacking Iranian energy facilities, the damage has been limited, and Iranian oil supply has not yet been affected. Additionally, OPEC+ began to increase production in April, with approximately 5 million barrels per day of idle capacity, and the pace of production increases may accelerate further. The core risk in the oil market going forward is whether Iran will block the Strait of Hormuz. From the current situation, the conflict has begun to ease, and the international community is calling for negotiations between both parties. In the short term, it is likely that both sides will control the scale of the conflict, and oil prices may fluctuate in the range of $70 to $80/barrel. As the conflict eases, the market will revert to pricing based on fundamentals, and oil prices will squeeze out the geopolitical risk premium, gradually shifting the price center to around $60/barrel. Based on the analysis of Iran's actions regarding the Strait of Hormuz, it seems more likely that Iran will exert pressure on the U.S. and Israel through this strait, but the probability of a complete blockade is low. Therefore, it is more likely that Iran will selectively harass specific vessels or use military activities for deterrence.
CITIC SEC: Geopolitical disturbances are driving Brent Futures prices to run in the range of $70 to $100/barrel in the short term.
Currently, geopolitical conflicts in the Middle East and between Russia and Ukraine are driving oil prices sharply upward, and oil prices are expected to remain volatile at high levels in the short term, paying attention to whether conflicts will escalate further and the operating conditions of crude oil infrastructure ports. OPEC+'s strategy for increasing production may change under high oil prices, with attention on the next meeting scheduled for July 6. Currently, demand in Europe and the U.S. is at a peak season, and it is important to see if inventory reduction performance can support high oil prices. Overall, geopolitical disturbances are pushing Brent Futures prices to run in the range of $70 to $100/barrel; if demand falls short of expectations and OPEC+ continues to increase production, the price center will gradually shift downwards.
Everbright Futures: If the situation in the Middle East unfolds beyond expectations, oil prices will show a significant upward trend.
The biggest fundamental factor in the oil market is still the extent of the impact of geopolitical events. Iran has contacted Oman and Qatar, requesting both countries to mediate between the United States and Iran to halt Israel's ongoing airstrikes and restart nuclear negotiations. At the same time, Saudi Arabia is also actively promoting a ceasefire framework behind the scenes, aimed at creating conditions for resuming talks. While Iran is making these efforts, Washington has also sent a clear message: Israel's military actions can only end if Iran fully accepts the proposal put forth by the United States, which includes a complete halt to uranium enrichment activities. This week will be a very important time window; if the situation in the Middle East is effectively contained, oil prices may come under pressure; however, if the situation unfolds beyond expectations, the supply side of the oil market will face vulnerabilities, leading to a significant increase in oil prices. Overall, the challenges for investors in terms of hold positions and trading are considerable, and it is advised to hold positions cautiously and pay attention to risks.
China National Investment Futures: The short-term outlook for crude oil is oscillating upwards; wait for the geopolitical situation to clarify before placing high-position short orders.
Over the weekend, both Israel and Iran continued mutual attacks; Israel conducted strikes on Iran's largest natural gas field, South Pars, and oil depots. Although the current attacks on energy infrastructure are limited to Iran's domestic supply chain rather than external exports, the ongoing geopolitical conflict and threats to block the Strait of Hormuz still prompt the market to price in potential reductions in Middle Eastern supply. The short-term outlook for crude oil is oscillating upwards; despite the macroeconomic and supply-demand factors not supporting a further upward breakthrough in oil prices, investors can continue to hold low-cost call options to cope with extreme geopolitical risks, and wait for the geopolitical situation to clarify before placing high-position short orders.
Industrial Futures: The crude oil market is likely to continue giving higher geopolitical premiums.
The situation between Israel and Iran continues to escalate. Following Israel's strikes against Iran's nuclear resources, Iranian missiles and drones retaliated; Israel then intensified its attacks on Iranian oil facilities, while Iran and Yemen also increased their attacks on Israel. As Iranian oil facilities are being targeted, there is a risk of the oil market potentially losing 1.5 million barrels per day of supply from Iran, and the probability of chaos in the crude oil market is gradually increasing. Overall, the crude oil market is likely to continue giving higher geopolitical premiums, with increased market volatility, and it is suggested to hold a buy call option strategy.
