How Are Israeli Airstrikes Driving Oil Price Surges and Global Inflation Risks?

06-14-2025, NEW YORK— How are Israel’s airstrikes on Iranian nuclear facilities fueling a surge in crude oil prices ($72.98) and heightening global inflation risks? The attacks, launched on June 13, 2025, targeting Iran’s Natanz site and military commanders, prompted a 7.26% oil price jump, with Brent crude hitting $74.23, as markets fear disruptions in the Middle East, which supplies a third of global crude, potentially pushing consumer prices higher and complicating central bank policies.

What Triggered the Oil Price Surge?

Israel’s “Operation Rising Lion” struck 100 Iranian targets, including nuclear and missile sites, without hitting oil infrastructure, per Israeli officials. Iran retaliated with over 100 drones and missiles, most intercepted, escalating fears of a broader conflict. U.S. crude oil rose 7.62% to $72.98 per barrel, and Brent climbed 7.02%, marking the largest weekly gain since 2022, driven by concerns over the Strait of Hormuz, through which 20% of global oil passes.

ALSO READ | Will the Strait of Hormuz Closure Push Oil Prices to Triple Digits?

Why Is the Strait of Hormuz a Concern?

The strait, a 21-mile-wide chokepoint, handles 21 million barrels per day (bpd) of oil and 20% of global LNG, primarily from Saudi Arabia and Qatar. Analysts warn that Iran could disrupt the Strait of Hormuz, but its 2 million bpd exports, primarily to China, make a blockade unlikely due to the risk of economic backlash. A closure could spike Brent to $120-$150 per barrel, per JPMorgan, fanning inflation globally.

How Are Global Markets Reacting?

The S&P 500 fell 1.1%, its worst day in a month, and the Dow dropped 1.8%, slipping below its 200-day line, reflecting risk aversion. Gold ($3,452.80) rose 1.48% as a safe haven, per Bloomberg data. Asian markets, like Japan’s Nikkei (-1.2%), slumped, while energy stocks in the Energy Select SPDR ETF (XLE) soared 5.6%, capitalizing on oil’s rally. Tariff uncertainties from Trump’s policies amplify market jitters.

ALSO READ | Strait of Hormuz on Edge: Will Iran’s Move Ignite an Oil Crisis?

What Inflation Risks Are Emerging?

A sustained 10% oil price hike could cut global growth by 0.15% and add 0.4% to inflation, per IMF estimates. U.S. consumer prices, tame in May at 3.1%, face upward pressure, with every $10 per barrel increase adding 25–30 cents per gallon of gasoline, costing consumers $1 billion annually. Europe, reliant on Middle East LNG, risks double-digit inflation if prices hit $150, per economic models.

Why Is Inflation Pressure Complicating Central Bank Plans?

The Federal Reserve, meeting June 18, is unlikely to cut rates from 4.75%, as May’s muted producer price inflation (1.8%) clashes with oil-driven risks, per BLS data. The ECB, facing eurozone reliance on imported energy, may delay easing despite 2.4% inflation. Asia’s moderating inflation, down to 2.7% in May, gives central banks room, but Japan’s auto sector, including Mazda ($840.50) and Subaru ($2,471.00), braces for $19 billion in tariff and oil cost hits.

Did you know?
Israeli airstrikes on Iran caused the price of crude oil, which is currently $72.98, to increase by 7.26%, raising concerns about global inflation due to potential disruptions in the Strait of Hormuz, a critical passage that handles 20% of the world's oil supply.

Can OPEC+ Mitigate Supply Risks?

OPEC+’s 5.8 million bpd spare capacity, led by Saudi Arabia, could offset Iran’s 3.3 million bpd output if disrupted, per Rystad Energy. However, OPEC+’s June decision to add 411,000 bpd surprised markets, signaling no immediate cuts despite conflict risks. Analysts question whether political dynamics, like Saudi Arabia’s U.S. ties, would prompt swift action to stabilize prices.

What Are the Broader Economic Impacts?

Higher oil prices threaten Japan’s recovery, with 25% U.S. tariffs on autos compounding costs. China’s exports to the U.S. fell 15% in May, hit by 145% tariffs, while its rare earth export ban disrupts tech supply chains, per customs data. The UK’s 0.6% GDP contraction in April, driven by tariffs and taxes, underscores trade war vulnerabilities, potentially worsened by energy costs.