📢 Disclaimer:

This article was prepared and published by Boursa Academy, the educational arm of Boursa AI, a Libyan online platform dedicated to raising awareness and enhancing knowledge about investment and financial markets for Libyan readers.

Unprecedented Escalation: Israel Strikes First, Iran Responds

On June 13, 2025, Israel launched a wide-scale aerial attack targeting military and nuclear sites inside Iran. The strikes killed leading members of the Iranian Revolutionary Guard and high-profile nuclear scientists, marking one of the most serious actions in recent years. Iran responded swiftly with missile and drone attacks on Israeli bases in the Negev desert and the Golan Heights, and threatened to expand the conflict to include Israel’s regional allies.

This sudden war erupted during a tense diplomatic moment, as the United States was pushing to revive nuclear negotiations with Iran, with partial Israeli involvement. While Washington sought a new deal to limit Iran’s nuclear capabilities in exchange for sanctions relief, Israel viewed the talks as a threat to its national security, especially amid ongoing Iranian military activity in the region.

The rapid escalation raised real fears of a wider war in the Middle East, a region critical to global energy markets and already fraught with geopolitical tensions.

💹 Global Markets in Shock: Is This the Return of “Oil for Fear”?

“Sometimes, oil prices surge not because of increased demand, but due to geopolitical fear—such as tensions in the Middle East. Some call this phase: 'oil for fear'.”

Global financial markets quickly reacted to the conflict. Following the announcement of the attacks, stock markets saw sharp declines, particularly in European and Asian exchanges. Investors fled from risk assets like equities and moved toward safe havens.

In the U.S., Wall Street indexes dropped significantly, with the Dow Jones losing over 1.8% and Nasdaq falling by 1.5%, amid growing concerns of potential American military involvement.

Investors rushed into safe assets: gold, government bonds, and the Japanese yen. Meanwhile, shares of defense, oil, and energy companies surged. Stocks of firms like Gulfport Energy, Teekay Tankers, and International Seaways rose between 4% to 8% in just one week.

However, the most dramatic impact was in the oil market. Prices jumped more than 9% within 48 hours, reaching their highest level since early 2023. Brent crude surpassed $76 per barrel, with forecasts suggesting further rises if military escalation continues.

🛢️ Oil Becomes the War Barometer

In this crisis, oil has emerged as the key barometer of the war—a primary signal reflecting the region’s security status. Any sharp spike in prices is interpreted by markets as a worsening situation. Conversely, signs of de-escalation or negotiations typically pull prices down.

But why has oil, specifically, become the compass for reading Middle East conflicts?

⚠️ The Key to It All: Strait of Hormuz

Here lies the answer—the Strait of Hormuz, a narrow waterway between the Arabian Gulf and the Gulf of Oman, bordering Iran to the north. Around 20% of the world’s oil trade passes through this critical chokepoint. Any threat to its closure—whether by war or military posturing—causes immediate global market disruption.

The strait is among the busiest maritime passages in the world, serving as the only sea outlet for oil and gas exports from Qatar, Kuwait, and Saudi Arabia to the open ocean. According to the U.S. Energy Information Administration, approximately 20 million barrels of crude oil and petroleum products transit the strait daily.

A recent Morgan Stanley analysis shows that 15% of global crude oil and 20% of liquefied natural gas (LNG) passes through Hormuz. With Israel expanding its military operations and U.S. President Donald Trump hinting at possible American involvement, reports have emerged suggesting that Iran may move to close the Strait of Hormuz—a move that would impose serious threats to any ships navigating the channel.

In a June 16 article in The Telegraph, former British Royal Navy officer Tom Sharpe wrote:

“Iran already has the means to shut the strait down.” He added that Iran’s threat arsenal includes naval mines, fast-attack boats, surface drones, mini-submarines, and mobile ballistic missiles. He also noted that mine clearance is one of the U.S. Navy’s weakest areas.

Analysts at Morgan Stanley and ING suggested that continued escalation could push oil prices above $120 per barrel, especially if oil movement through the Gulf is disrupted. According to ClearView Energy Partners, prices could rise $8 to $30 more per barrel if the strait is effectively closed.

📈 The War Isn’t Just on the Battlefield—It’s in the Markets Too

What’s unfolding between Iran and Israel is a powerful reminder that 21st-century warfare isn’t limited to the frontlines. It extends to stock screens, energy prices, and investor confidence.

In times of geopolitical crises, markets often move based on fear, not fundamentals. That’s why understanding political and regional developments is essential for interpreting market behavior.

In today’s world, the price of a barrel of oil can speak louder than a thousand political statements, and a narrow strait like Hormuz may very well determine the fate of entire global economies.