Last week, the markets got quite a scare. US forces, joining the Israelis, bombed Iranian nuclear facilities where the Islamist regime was suspected of developing a nuclear bomb. Fearing a large-scale conflict that could damage the energy infrastructure in Iran, the seventh largest oil producer in the world, crude oil prices jumped around 10 per cent in the commodity markets.
The WTI Crude, produced in West Texas, went up to $71.29 a barrel the day following the attack on Iran, 13 June. Then, after some slight recoil, it went as high as $77.09 a barrel on 19 June as the world awaited the Ayatollah’s response.
Speculation was that Iran may close down the Strait of Hormuz, a shipping lane inside the Middle Eastern country where 20 per cent of the world’s daily oil production passes through, as retaliation against the United States. There was one major factor, however, that made such a move less than likely: not only would it hurt Iran more than the US, a sacrifice that they might be willing to make, but it also would hurt China a lot more than the US. China is the world’s largest buyer of Iranian oil, and around 50 per cent of its oil imports come through the shipping lane. On the other hand, only around 7 per cent of the US crude oil imports come through the Strait of Hormuz.
On Monday, 23 June, Iran carried out retaliatory attacks on the largest US military base in the area, in the country of Qatar. However, the Strait of Hormuz remained open. What’s more, after President Trump thanked the Iranians on social media for their subdued response, he also announced a ceasefire had been agreed between Israel and Iran. Foreign Minister Seyed Abbas Araghchi of Iran has also made a post on X that suggests that the armed conflict between the belligerent parties had, in fact, come to a halt.
This caused crude oil prices to take a sharp plunge. WTI Crude is currently trading at $66.82 a barrel, compared to its peak at $77.09 last week. The British-made Brent Crude is trading at $69.67 a barrel after trading as high as $79.22 per barrel last week, and the UEA-produced Murban Crude is at $70.27 a barrel as of the time of writing this, after going as high as $79.69 a barrel last week.
Accordingly, the US stock market reacted very favourably to the move in crude oil prices on the commodities markets. The Dow closed yesterday’s session up 0.89 per cent, and is now up 0.45 per cent year-to-date. The S&P 500 posted a 0.96-per-cent gain and is currently up 2.67 per cent YTD, while the tech-heavy NASDAQ closed 0.94 per cent higher yesterday, and is up 1.82 per cent YTD. Pre-market trading today suggests a further rise for the major American stock indexes for the day.
What’s more, after taking some public flak from President Trump, Federal Reserve Chairman Jerome Powell has hinted that he might be willing to cut rates at last after the July Fed meeting, which will be taking place on 29–30 July.
The average cost of a gallon of gas is still rising in the United States. According to AAA, it is now at $3.224 a gallon, up from $3.167 a gallon last Tuesday. However, gas prices typically increase during the summer due to increased demand for summertime travel, and consumer prices have a delayed response to moves on the international commodity markets.
Additionally, the national average for a gallon of gas is still cheaper in the US than a year before. On this date in 2024, under President Biden, it was at $3.447 a gallon.
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