NEW YORK — Oil prices eased on June 18, falling just below $75 per barrel after Federal Reserve officials signaled a neutral policy stance. The decline followed a recent 14% surge earlier in the week amid heightened geopolitical tensions between Israel and Iran, which had sent markets reeling. Despite this backdrop, a complex interplay of supply stress and signs of cooling U.S. energy demand is keeping prices in check.
Following the Fed decision, U.S. stock futures remained flat, while equities edged modestly higher. The central bank’s projections indicated no immediate appetite for additional rate hikes, easing investor concerns. Weak May economic indicators—including a softened labor market and softer retail sales—also contributed to an easing of Treasury yields. The benchmark 10‑year dropped to roughly 4.36%, and the two‑year yield slid to near 3.94%.
The backdrop remains fraught: Israel’s June 13 airstrikes on Iranian nuclear and missile sites and Iran’s subsequent drone/missile counterattacks ignited fears of a broader confrontation. Brent crude surged 7–14% in the wake of the raids before retreating to around $75–$76 a barrel . Goldman Sachs now attributes a $10 per barrel “geopolitical risk premium” to Brent in its current range of $76–$77.
Yet analysts caution that longer-lived disruptions have not materialized. JPMorgan, among others, notes that although prices spiked initially, such conflicts historically inflict only short-lived shocks unless they evolve into full-blown regime disruptions—something not yet evident in Iran. According to Goldman, while sustained supply constraints could push Brent beyond $90, trends so far suggest a likely reversion toward $60 in late 2025 absent escalation.
Still, risks remain acute. Iran has threatened to close the strategic Strait of Hormuz, through which roughly 20% of global seaborne crude flows—an action that could catapult prices past $100 or more. Barclays warning even points to scenarios exceeding $100 if Iranian exports are halved.
Domestically, U.S. crude inventories are mixed. While economic data signals weakening demand, storage levels remain elevated, weighing on prices—mirroring recent trends in U.S. supply reports . That leaves markets balancing between an often-contentious mix of demand softness and geopolitical supply threats.
Investors are now turning to the Fed’s forthcoming dot‑plot projections and any signs of rate cuts that could bolster economic growth and energy usage. At the same time, any new flare‑ups in the Middle East—especially targeting infrastructure or transit chokepoints—could swiftly reverse the current downtrend.
In sum, while oil prices have pulled back from midweek highs amid cooling U.S. economic signals and a measured Fed, the volatile Middle East theater remains the variable with the greatest capacity to redraw the price landscape.
