26 June 2025 — The Twelve-Day War: Why Oil Spiked and Then Fell Back

On 13 June, Israel launched a surprise military operation against Iranian nuclear and missile facilities. Iran retaliated. On 21 June, U.S. aircraft joined the operation and struck three Iranian nuclear sites directly. Iran responded by firing missiles at the U.S. airbase in Qatar. On 24 June, after twelve days of fighting, a ceasefire was declared with President Trump as broker.¹ Brent crude climbed from about $65 per barrel before the attack to $81. Today, Brent is back below $68 — where it was before the fighting began.²

The muted response comes down to geography. The Strait of Hormuz is a narrow stretch of water through which roughly one-fifth of the world’s oil passes daily. If Iran had closed it, oil would have gone above $100.³ Goldman Sachs estimated at the peak that oil could “blow past $100 a barrel.” Markets were holding their breath.

But Iran did not close the strait. It fired missiles at a U.S. airbase in Qatar — politically symbolic, not economic — and reportedly gave advance warning that minimised casualties. Robin Brooks of Brookings captured how investors read this: “If Iran were serious about retaliation, it would sink an oil tanker in the Straits of Hormuz. The fact that it isn’t doing that means it’s bending the knee.”⁴ Within 48 hours, markets had concluded the same thing.

Strikingly, global equity markets have risen during the crisis. The S&P 500 is up roughly 5% for the month. The Indian market is at a record high. Partly the ceasefire has come faster than feared; partly investors are shifting attention to the next Fed cut and the ongoing AI boom. This crisis has turned out less severe than Liberation Day two months ago.

The one clear lasting effect is inside the Fed. An oil shock — even a short one — complicates the case for cutting. Mark Zandi of Moody’s on CNBC yesterday: “Higher oil prices are another negative supply shock, lifting inflation and hurting growth, putting the Fed in a no-win situation.”⁵ Futures markets have pushed back the expected date of the next cut; some now question whether the Fed will cut at all this second half.

This month offers a clean illustration of a pattern that recurs through financial history: geopolitical crises usually produce sharp but short-lived market moves. The 1991 Gulf War, 2003 Iraq War, 2022 Ukraine, 2023 Hamas: all produced short-term panic and modest medium-term impact. This is not an argument for ignoring geopolitics — it is an argument for not trading on it. Timing your portfolio around military events requires being right both about the battlefield and about how markets interpret it, and almost nobody can do both consistently.