By Giulia Petroni


Here's a look at what happened in oil markets in the week of June 16-20 and what the focus will be in the days to come.


OVERVIEW: Oil prices are set for weekly gains as Israel and Iran continue to clash a week into their conflict, raising fears of a broader war that could severely disrupt energy flows in the region. Brent crude, the international oil benchmark, currently trades above $76 a barrel and gained more than 10% since the start of the conflict. The U.S. oil gauge West Texas Intermediate is around $73 a barrel.


MACRO: The Federal Reserve held interest rates steady at its June meeting but left the door open to potential rate cuts later this year.

Inflation has cooled in recent months, with the U.S. central bank's preferred gauge showing a 2.1% annual increase in the 12 months through April. Still, many economists anticipate that inflation could tick up again as a result of tariffs.

Fed Chair Jerome Powell said the central bank is well-positioned to respond to whatever comes next, awaiting clarity on the economic impact of President Trump's "Liberation Day" tariffs.


GEOPOLITICAL RISKS: President Trump set a two-week deadline to decide whether to strike Iran, easing fears of imminent U.S. military intervention and opening the door to diplomacy. Meanwhile, European foreign ministers are holding talks with Iranian officials in Geneva, urging them to de-escalate the conflict.

On Thursday, oil prices spiked as investors grew increasingly nervous about escalating hostilities between Israel and Iran and a potential U.S. intervention. Comments from some Israeli officials also appeared to suggest that regime change in Iran could be an official war goal, raising market concerns.

Fears about a potential blockade of the Strait of Hormuz--through which about a fifth of the world's daily oil supply flows--are keeping the risk premium elevated, even though such an event remains unlikely. "As this volume could not be transported to the world market via other routes such as pipelines in the event of a blockade by Iran, the oil market would tighten considerably," according to Rystad Energy.

Meanwhile, Middle East maritime security is facing new challenges, with widespread signal jamming at ports raising concerns about the safety of shipping lanes.


SUPPLY AND DEMAND: The International Energy Agency unveiled its medium-term outlook this week, reaffirming its expectation that oil demand will peak by the end of the decade. The Paris-based energy agency expects only modest demand growth in China, while U.S. demand is projected to decline more gradually.

Its 2025 and 2026 forecasts for global oil-demand growth were lowered to 724,000 barrels a day and 739,000 barrels a day, partly as a result of a challenging economic outlook and the uptake of clean-energy technologies. The Organization of the Petroleum Exporting Countries instead kept its oil demand expectations unchanged as it continues to ramp up production, but trimmed next year's forecast for supply growth from the U.S. and other rivals.

Meanwhile, U.S. crude oil inventories recorded a surprisingly sharp decline of 11.5 million barrels last week, data from the Energy Information Administration showed. "This was the largest weekly drop in inventories in almost a year," according to Commerzbank Research. The drawdown was driven by a significant drop in net imports, as imports fell and exports rose.


WHAT'S AHEAD: Oil prices are expected to remain heavily influenced by developments in the Middle East conflict next week. "The coming days will be critical for market participants, who must choose between moving early or waiting to see how the situation evolves," said Mukesh Sahdev, Rystad Energy's head of commodity markets. "Our signal remains that oil price spiking is likely to be contained below $80/bbl till the U.S. decides."

In the coming week, key economic data will also be in focus, including U.S. consumer sentiment figures and PCE inflation data, which could provide additional direction for oil prices and broader market sentiment.


Write to Giulia Petroni at giulia.petroni@wsj.com


(END) Dow Jones Newswires

06-20-25 1228ET