Oil: less sensitive to middle east conflict
The recent Middle East conflict sparked concerns surrounding Iran’s oil supply and the impact it could have on oil prices and the current disinflation trend. However, the price of oil is now at the level it was before the first strike on Iran. Due to the shale revolution, the oil market is ruled by new dynamics.
3 mins Reading time
Published on 30 June 2025
Historically, one consequence of geopolitical tensions in the Middle East has been higher oil prices. The recent conflict sparked concerns surrounding Iran’s oil supply and the impact it could have on oil prices and the current disinflation trend. However, after spiking briefly following Israel’s first strike on Iran on June 13, the price of oil has remained steady and is back to where it was before tensions intensified.
Why? In short, it’s due to the shale revolution that has transpired over the last decade or so, increasing U.S. oil production and reducing the world’s dependence on crude oil from the Middle East. From 2013 to 2024, growth in global oil demand was largely met by supply outside of the Organization of the Petroleum Exporting Countries (OPEC), an international organization of policy-setting oil-producing countries to which Iran belongs. The expectation for 2025 and 2026 is that supply from non-OPEC countries will continue meeting global demand for oil. Nevertheless, if Iran’s 1.6 million barrels per day of oil exports were no longer available, OPEC would still harbor excess capacity.
It appears that the global oil market is not extremely exposed to affairs in the Middle East as it once was. Since the latest conflict began, the S&P 500 has remained resilient, indicating that investors understand these oil market dynamics and have become somewhat desensitized to geopolitics. We remain constructive on U.S. equities and maintain our year-end forecast of 6,400 for the S&P 500.
762574 Exp : 30 June 2026
YOU MIGHT ALSO LIKE
After climbing 17% year to date through late October, the S&P 500 declined 5% through November 20. We believe the market was due for a healthy correction. While further downside is possible, it would not concern us.
This past year was rife with risks to the global economy: policy changes, tariff uncertainty and more. Yet, the global economy held up as manufacturing and services activity strengthened across the world. We see an opportunity for U.S. investors to diversify geographically.
Considering the slowing job market, we dove into retail sales data to search for signs of the direction of household spending. We analyzed existing-store sales and found that, despite the softening labor market and concerns about growth, aggregate consumer spending remains resilient.
Bullish on Fed easing?
Bullish on fed easing?
As expected, the Federal Open Market Committee delivered another 25-basis point rate cut. Investors are now focused on the pace of cuts from here. However, the more important driver of future equity returns is whether the Fed is easing into an economy that is growing or not.
