A week of extreme military and verbal volatility in the Persian Gulf concluded with oil prices retreating to three-month lows as global markets shifted their focus from direct combat to the prospect of a preliminary peace agreement. While President Donald Trump signalled that a memorandum of understanding to reopen the Strait of Hormuz was imminent, the underlying fragility of global crude inventories and the depletion of strategic reserves continue to present a significant risk to macroeconomic stability.
Price dynamics between June 9 and June 13 followed the erratic rhythm of battlefield reports and social media announcements. International market price assessments for Brent crude jumped to $94.36 a barrel on Wednesday, June 10, after the US military launched “self-defense strikes” against Iranian air defenses in retaliation for the downing of an Army Apache helicopter the previous day. However, the trend reversed sharply by Friday, June 12, as hopes for a diplomatic solution mounted. Brent futures tumbled to $87.08, while West Texas Intermediate (WTI) retreated to $84.55 a barrel, reflecting a weekly decline of more than 3% as traders began to price in the potential restoration of commercial shipping through the world’s most vital energy artery.
The week’s geopolitical tension peaked on Thursday morning when President Trump threatened to “assume total control” of Iran’s oil and gas infrastructure, specifically vowing to seize Kharg Island, a terminal that handles approximately 90% of the Islamic Republic’s oil exports. This rhetoric was met with a defiant response from Iran’s top negotiator, Mohammad Bagher Ghalibaf, who warned that such impulsive decisions would create an “endless quagmire.” By that afternoon, however, the White House executed a dramatic pivot; the President announced he had canceled planned strikes because a memorandum of understanding had been approved by “the highest level of Iranian leadership,” including Supreme Leader Mojtaba Khamenei. Pakistani Prime Minister Shehbaz Sharif, whose government has acted as a mediator alongside Qatar, confirmed that a final text had been reached, though Iranian foreign ministry spokesman Esmail Baghaei cautioned that nothing was yet finalised.
The urgency of reaching a settlement was underscored by new data illustrating the severe inflationary impact of the three-month conflict. US Consumer Price Index (CPI) figures released on June 10 showed annual inflation accelerating to a three-year high of 4.2% in May, with energy costs accounting for more than 60% of the rise. At the pump, American drivers faced an average gasoline price of $4.15 per gallon — a 40% increase over the previous year. These pressures compelled the European Central Bank (ECB) to raise its key interest rate to 2.25% on June 11, the first increase since 2023, as President Christine Lagarde noted that higher energy prices had begun to broaden throughout the Eurozone economy.
Underpinning the market’s tentative calm are complex supply adjustments and an increasing reliance on “dark transits.” US Energy Secretary Chris Wright noted on June 12 that approximately 7 million barrels per day (b/d) of oil and fuel were currently moving through the Strait of Hormuz — roughly half of pre-war volumes. President Trump claimed a “secret mission” has escorted 200 vessels carrying 100 million barrels of oil through the waterway at night with transmitters disabled to avoid detection. Simultaneously, a sharp reduction in demand from China has acted as a critical safety valve; May imports into the world’s largest oil consumer fell to an eight-year low of 7.82 million b/d as Beijing began to draw down domestic reserves rather than purchase expensive seaborne cargoes.
The outlook remains precarious as the global buffer against supply shocks reaches a critical low. The US Strategic Petroleum Reserve (SPR) has declined to 349.2 million barrels, its lowest level since 1983, and analysts warn that pressure in the salt caverns is dropping to levels that could risk structural damage if further drawdowns are attempted. Even with a signed agreement, the World Bank warns that the “biggest supply shock in 50 years” has already weakened 2026 global growth prospects to 2.5%. Should the current diplomatic opening fail to produce a durable reopening of the Strait, industry models from Exxon Mobil and Energy Aspects suggest international market price assessments could rapidly escalate toward $150 or $160 a barrel by the fourth quarter.