Israel-Iran War Shows Global Markets No Longer Fear Middle Eastern Crises
- Yossi Mann
- Jul 16
- 7 min read
Updated: Jul 22
Despite fears of a sharp spike following Israeli-Iranian hostilities in June 2025, the price of oil rose only moderately during the war, and by its end, was actually lower than before it broke out. Global powers cooperated to prevent escalation and secure a ceasefire, aiming to avoid further disruptions to the world economy. The behaviour of both markets and governments demonstrates that the world is no longer as alarmed by Middle East crises as it once was
A U.S. Air Force B-2 Spirit is recovered after supporting Operation MIDNIGHT HAMMER at Whiteman Air Force Base, Missouri, 22 June 2025. Courtesy Photo on DVIDSHUB (Public Domain)*
The Yom Kippur War is remembered as a turning point in global financial markets. The six-month oil embargo imposed by Arab exporters following the war raised the price of oil nearly four-and-a-half times, sparking stock market collapses, sharp inflation and steep unemployment across much of the world. The energy crisis of the 1970s established a entrenched assumption connecting dramatic Middle East events to turmoil in the global economy.[1] Subsequent crises – the Iran-Iraq War (1980–88) and the two Gulf Wars (1991, 2003) – reinforced the perceived linkage between regional geopolitics and upheaval in global markets.
In this context, the Israel-Iran war of June 2025 initially seemed like the realization of modern-day nightmare scenarios.[2] For more than a decade, such a conflict was seen as a potential repeat of events like the Iran-Iraq War, in which hundreds of oil tankers were targeted.[3] The primary concern was that Iran would move to close the Strait of Hormuz,[4] disrupting the flow of 20% to 25% of the world’s oil supply originating in Saudi Arabia, the UAE, Qatar, Iraq, and Iran.[5] In a worst-case scenario, JPMorgan analysts warned that a prolonged closure of Hormuz and disruption to additional oil producing states could push the price per barrel to $120-$130.[6]
None of this happened.
Contrary to expectations, the “Twelve-Day War” (as U.S. President Donald Trump dubbed it),[7] caused only moderate fluctuations in global commodity markets, especially oil, and to a lesser extent, gas, largely due to fears that liquefied natural gas shipments from Qatar might be disrupted. The price of Brent crude rose from $69.36 on June 12 (the eve of the war) to a peak of $77.08 on June 19, a near 12% increase. Prices then began falling, reaching $66.69 on June 24, the day a ceasefire was declared – lower than before the war began.[8] Even the American bombing of Iran’s nuclear facilities in Fordow on June 21-22 failed to cause a sharp uptick in oil markets at the next week’s start.[9]
The moderate price jump at the war’s outset suggested markets had quickly decided that the threat to critical oil assets and supply routes was limited, with a low probability for the closure of the Strait of Hormuz and the development of any substantial energy shortage.
The Normalisation of Crisis
Why did markets react so mildly to a scenario that had caused global anxiety for over a decade? One key reason is that markets have apparently become accustomed to intermittent clashes in the Middle East, particularly since 7 October 2023 massacre by Hamas and the ensuing conflicts in Gaza, Lebanon, and elsewhere. In other words, investors now anticipate that Middle East conflicts will flare up occasionally, then stabilise quickly, without long-term disruptions.
Today, markets manage such crises through greater transparency and real-time information sharing, which increases confidence in depicting accurate scopes of risk. Additionally, governments – especially in the West and Asia – publicly commit to tapping strategic reserves, if need be, in order to counter potential energy shortages. Meanwhile, increased production and shipping from areas outside the Strait of Hormuz, such as Fujairah in the United Arab Emirates, offer alternative export routes and reduce the risk of chokepoints.[10]
The “Twelve-Day War” demonstrated the international community’s capacity for pragmatic diplomacy when a shared interest – protecting a fragile global economy – is at stake
Furthermore, it appears world powers were sceptical of Iran’s desire to follow through on its threats to completely block the Strait of Hormuz. While difficult to quantify, it seems the superpowers displayed notable restraint during this conflict, avoiding military or diplomatic moves that might have escalated tensions or prolonged the crisis.
The clearest evidence of this restraint is the speed with which a U.S.-Qatari-brokered ceasefire between Israel and Iran was secured,[11] as well as the muted responses from Moscow and Beijing, Tehran’s allies, even after the Fordow bombing by the Trump administration.[12] In fact, the Chinese foreign minister’s careful statement in response to the U.S. strikes emphasised the importance of freedom of navigation in Hormuz, a message seemingly aimed at Tehran more than at Washington.[13] The “Twelve-Day War” ultimately demonstrated the international community’s capacity for pragmatic diplomacy when a shared interest – protecting a fragile global economy – is at stake.
Analysts who have long predicted catastrophic consequences from an Israeli strike on Iran may have to reconsider their calculations given how these events unfolded. But the June 2025 war highlights how both markets and governments’ decision-making processes have evolved – aided by the information revolution, which allow for more accurate, real-time geopolitical risk assessments.
Above all, with the appropriate caution, the market’s response may indicate that fears of global economic collapse from Middle East wars are increasingly outdated.[14]
Lessons Yet to Be Learned
Israel’s performance during the conflict demonstrated refined strategic thinking – combining advanced military operations with sustained diplomatic engagement, even with adversarial or diplomatically distant nations. This conflict can serve as a foundation for developing a long-term strategy focused on containing Iran’s threat, based on years of careful preparation and coordination.
The 2020 Abraham Accords offer another recent example of strategic foresight. They reflect Israel’s acknowledgement of regional transformations that took place the decade preceding the Accords all over the Middle East, with governments gradually prioritizing novel models of regional cooperation over inward-looking political stagnation.
The 1973 oil crisis introduced the concept of “energy security” and galvanised global efforts to diversify away from oil dependency. This included the founding of the International Energy Agency (IEA) under the Organisation for Economic Co-operation and Development (OECD) and increased state investments in renewables and nuclear power.[15]
While the 1973 war ignited global panic regarding energy, the June 2025 war may be remembered as an alleviant
Similarly, the June 2025 war – which saw heightened threats to the Gulf states and to the Strait of Hormuz – could create new opportunities for regional collaboration. It may drive deeper global coordination on energy security, including tighter partnerships between Israel and the region’s nations. This could involve improved protection for energy infrastructure, enhanced intelligence and early warning systems, and advanced joint security operations.
Future scholarship will undoubtedly examine the geopolitical aftermath of the “Twelve-Day War.” But while the 1973 war ignited global panic regarding the energy sector, the 2025 conflict may be remembered as an alleviant. It revealed that global perceptions of Middle Eastern instability are shifting – and may also push regional players to pursue more cohesive cooperation around energy and supply chain resilience.
Dr. Yossi Mann is a senior research fellow at the Abba Eban Institute for Diplomacy & Foreign Relations, where he leads the Israel-Arab Gulf Program. He is a researcher at Bar-Ilan University and a lecturer at the School of Government at Reichman University. Previously, he served as Chair of the Middle Eastern Studies Department at Bar-Ilan University and the head of the Middle Eastern Studies program at Reichman University. His research focuses on society and economy in the Gulf region, with an emphasis on energy affairs, as well as the integration of artificial intelligence in qualitative research to assess social and economic developments in the region.
Notes:
* The appearance of U.S. Department of Defense (DoD) visual information does not imply or constitute DoD endorsement.
[1] The dependence on these natural resources led to a stock market collapse – especially in markets like Japan that were highly dependent on oil imports from the Middle East – and caused high inflation and unemployment rates. One of the manifestations of the crisis was the increase in the cost of living in Arab countries, as it led to a rise in food prices in countries that were the world's largest food importers. The most prominent of these was Egypt, where the 1977 "Bread Riots" ("Intifāḍhat-ul-Khobz") claimed the lives of more than 70 Egyptian nationals.
See:
Rasoul Sorkhabi, “The First Oil Shock,” GoExPro, 6 December 2015. https://geoexpro.com/the-first-oil-shock/; Neil Ketchley, Ferdinand Eibl, and Jeroen Gunning, “Anti-austerity riots in late developing states: Evidence from the 1977 Egyptian Bread Intifada,” Journal of Peace Research 61:6, 2023. https://doi.org/10.1177/00223433231168188; Office of the Historian, “Oil Embargo, 1973–1974,” Milestones in the History of U.S. Foreign Relations, n.d. https://history.state.gov/milestones/1969-1976/oil-embargo; “Skyrocketing inflation and Japan’s economic slowdown. The global oil crisis and JEXIM’s efforts,” JBIC History, Vol. 3, August 2023. https://www.jbic.go.jp/en/information/today/today_202307/jtd_202307_column1.html
[2] Adrien Pécout, “Israel-Iran war: Hormuz, the world's oil chokepoint, is under tension,” Le Monde, 25 June 2025. https://www.lemonde.fr/en/economy/article/2025/06/25/israel-iran-war-hormuz-the-world-s-oil-chokepoint-is-under-tension_6742691_19.html
[3] “Strait of Hormuz – Tanker War,” Strauss Center, n.d. https://www.strausscenter.org/strait-of-hormuz-tanker-war
[4] James Hyerczyk, “Oil News: $150+ Crude? Doomsday Scenario Sees Hormuz Closure Threatening Supply,” FXEmpire, 13 June 2025. https://www.fxempire.com/forecasts/article/oil-news-150-crude-doomsday-scenario-sees-hormuz-closure-threatening-supply-1525817
[5] “Oil Market Report – June 2025”, International Energy Agency, June 2025. https://www.iea.org/reports/oil-market-report-june-2025
[6] Jennifer Sor, “JPMorgan lays out a worst-case scenario for Israel-Iran that could send oil prices spiking 75%,” Business Insider, 23 June 2025. https://www.businessinsider.com/iran-strikes-oil-price-forecast-israel-brent-wti-outlook-jpmorgan-2025-6
[7] Jack Moore, “Israel and Iran agree to ceasefire to bring end to '12 DAY WAR,' Trump says,” ABC News, 24 June 2025. https://abcnews.go.com/International/israel-iran-agree-ceasefire-bring-end-12-day/story?id=123137697
[8] “Brent Crude (August Contract), 1 Month index,” Oil Price, 4 July 2025. https://oilprice.com/oil-price-charts/
[9] Dearbail Jordan, “Oil prices tumble after Israel agrees to Iran Ceasefire,” BBC, 24 June 2025. https://www.bbc.com/news/articles/crk6elpx4gpo
[10] Ron Bousso, “Commentary: Iran oil doomsday in Hormuz may be more fear than reality,” Reuters, 23 June 2025. https://www.reuters.com/markets/commodities/iran-oil-doomsday-hormuz-may-be-more-fear-than-reality-bousso-2025-06-22/
[11] Amichai Stein, “Qatar mediated between Israel and Iran to reach ceasefire, source tells 'Post',” Jerusalem Post, 24 June 2025. https://www.jpost.com/middle-east/iran-news/article-858746
[12] Leon Aron, “The Iran-China-Russia Axis Crumbles When It Matters,” The Atlantic, 29 June 2025. https://www.theatlantic.com/international/archive/2025/06/iran-china-russia-axis-crumbles/683369/
[13] Jeremy Fleming-Jones, “China calls for global efforts to defuse tensions over vital Strait of Hormuz,” EuroNews, 23 June 2025. https://www.euronews.com/my-europe/2025/06/23/china-calls-for-global-efforts-to-defuse-tension-over-vital-strait-of-hormuz
[14] Hyerczyk, “Oil News: $150+ Crude?”
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