June 23, 2025
Varcoe: Amid Middle East conflict, oil prices gyrate wildly and Canadian producers assess spending
By Chris Varcoe
Oil markets saw a dramatic shift at the start of the week as tensions escalated in the Middle East. After the U.S. bombed underground nuclear sites in Iran over the weekend, prices for West Texas Intermediate (WTI) crude briefly surged above US$75 per barrel. However, those gains were quickly erased by Monday, with prices tumbling over US$5 to close at US$68.51. The volatility came as markets tried to assess the broader implications of the conflict, especially after Iran responded with missile strikes on a U.S. base in Qatar. Though aggressive, Iran’s move appeared calibrated, reportedly matching the number of U.S. bombs dropped, possibly signaling a desire to de-escalate. President Trump later posted that Iran and Israel had agreed to a ceasefire, contributing to market relief.
Despite this, energy analysts and industry watchers warned that the risk to global oil supply remains. Particular concern is focused on the Strait of Hormuz—a narrow but vital shipping lane through which one-fifth of global petroleum liquids pass. Although Iran's parliament approved a motion to close the strait, it still requires higher-level authorization. A prolonged disruption there could send prices soaring past US$100 per barrel and affect liquefied natural gas exports as well. While Canadian producers are watching the situation closely, most are maintaining current investment plans. Some, like Surge Energy, have hedged production at favorable prices but are avoiding significant spending changes for now.
Martin King, managing director of North American energy market analysis at RBN Energy, noted the reaction in prices was largely speculative. “The jump overnight was just more of a knee-jerk reaction,” he said. “But until there’s more direct evidence of some kind of supply impact against Iran, of greater isolation of Iran — or an actual blockage — the market has fairly priced in a lot of risk.” With underlying concerns about global demand and OPEC+ production still in play, the geopolitical turmoil adds another complex layer to an already fragile energy market.
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