June 2025 Iran-Israel Conflict: Why Oil Rose While Tankers Kept Moving

On 13 June 2025, Israel struck targets in Iran. Oil prices jumped, even though tankers were still moving through the Strait of Hormuz, a key sea route for Gulf oil.

If oil was still arriving, why were buyers paying more for it?

The answer helps explain how a conflict far from India can raise the cost of its oil without a single Indian shipment being delayed. Buyers were responding to what might happen next.

Why one sea passage mattered so much

Oil produced in the Gulf has to reach customers around the world. Much of it travels by tanker through the Strait of Hormuz, a narrow passage between Iran and Oman.

About a fifth of global oil consumption passed through this route in 2024, according to the US Energy Information Administration (EIA). There were some pipelines around it, but they could not replace all the oil normally carried through the strait.

So the worry was not just whether oil would still be produced. It was whether that oil could reach buyers. A supply route can matter as much as the source of the supply.

A possible shortage can change today’s price

Imagine a town where most vegetables arrive over one bridge. The bridge is open, but wholesalers have reason to fear it may close next week.

They may try to buy extra stock now rather than risk having nothing to sell later. Several buyers competing for those vegetables can push up today’s price, even while lorries are still crossing the bridge. This is a hypothetical example of how expected supply and demandSupply, demand and pricePrices tend to rise when buyers want more than sellers can supply, and fall when supply exceeds demand. For goods like oil, expectations about future supply can move today's price too.View topic and related stories can affect prices before a shortage occurs.

Oil buyers faced a similar uncertainty. The conflict raised the possibility that a major route might be disrupted. A buyer needing oil for a refinery could not simply assume that future deliveries would arrive as usual.

The extra amount buyers are willing to pay because of that danger is often called a risk premiumRisk premium in a commodity priceIn a commodity market, a risk premium is the extra price buyers pay today because a supply disruption is feared but has not yet happened. The premium can shrink quickly if the feared event does not occur. The same word is used more broadly for the extra return investors expect for taking on risk.View topic and related stories. Here, it meant the oil price reflected the possibility of a supply disruption, not just the supplies available that day.

Brent crude, a widely used reference price for oilCommodity benchmark pricesA benchmark such as Brent is a reference price. The price paid for a particular cargo can differ because of its grade, delivery location, freight and contract terms.View topic and related stories, rose from $69 a barrel before the strikes to $79 within a week. A barrel is a standard measure of oil volume. The price movement shows how quickly a threat can matter; it does not tell us an exact dollar amount attributable to that threat alone.

When the threat eased, the price fell back

The conflict widened, with US strikes on Iran and an Iranian response, before a ceasefire followed.

After the ceasefire, concern about disruption to Middle East oil supplies eased. Brent ended June at about $68 a barrel, close to where it had been before the strikes.

Think back to the vegetable market. If the bridge now looks likely to stay open, buyers have less reason to pay extra to secure stock immediately. A premium built on fear can shrink when that fear eases.

This does not mean the earlier concern was imaginary. The price reflected a risk that might have materialised. When the outlook changed, the price changed too.

Why India could have enough oil and still face a higher cost

India imports most of its crude oil. During the conflict, its petroleum ministry said supplies were adequate for the coming months, according to an All India Radio report.

But having enough oil and buying it at the same price are different things. An available shipment can still become more expensive.

Refineries buy crude oil and turn it into fuels such as petrol and diesel. When the purchase price rises, a refiner needs more money to buy the same quantity. This is an oil import price shockOil import price shockWhen a country imports much of its crude oil, a higher dollar price can raise its import bill and feed into domestic costs. The effect depends on volumes, the exchange rate and how prices are passed on.View topic and related stories: the cost rises even without an increase in the amount imported.

Here is a smaller, hypothetical example. Suppose a refiner buys 1,000 barrels, and its purchase price rises by $5 per barrel. The same order now costs $5,000 more.

At an assumed exchange rateExchange rateAn exchange rate is the price of one currency in another, such as rupees per US dollar. When it takes more rupees to buy a dollar, the rupee has weakened against the dollar.View topic and related stories of ₹85 to the dollar, that is an extra ₹4.25 lakh. No extra oil has been bought; each barrel simply costs more. These are illustrative figures, not an actual Indian purchase.

The import bill depends on both price and quantityImport bill: price and volumeAn import bill depends on the amount bought and the price per unit. A change in both compounds; the domestic-currency cost also depends on the exchange rate and other charges.View topic and related stories. Buying more barrels increases the bill too; buying fewer may offset part of a price increase. That is why a headline oil-price rise alone cannot tell us the change in India’s total import spending.

There is also a currency effect. Oil purchases are commonly priced in dollars. If the rupee weakens against the dollarExchange-rate depreciationA currency depreciates when it buys less of another currency, so more units are needed to buy one dollar.View topic and related stories, the refiner needs more rupees to buy the same dollars. A higher oil price and a weaker rupee can therefore add to the cost together. This is a possible mechanism, not a claim that both happened during this episode.

Does dearer crude mean dearer petrol immediately?

A higher crude cost has to be borne somewhere, but it does not automatically reach the petrol pump in the same proportion or on the same day.

Suppose a business pays more for an input. If it leaves its selling price unchanged, its profit may shrink. If it raises its selling price, customers bear more of the cost. This movement of a cost into the price charged to customers is cost pass-throughCost pass-throughA higher input cost can be absorbed in a business’s profit, passed to customers through prices, or shared between them. Contracts, competition and the size of that input affect the result.View topic and related stories.

For petrol and diesel, the outcome also depends on how retail prices are set, including taxes and the margins of the businesses involved. This article’s sources do not establish a pump-price change caused by the June conflict.

Duration matters as well. A price spike lasting a few days is different from the same increase lasting several months. In June, the rise largely reversed before the month ended. Treating the highest price as though it applied to every purchase all month would exaggerate the effect. The sources here do not provide an official total for India’s additional import cost.

Why businesses and investors watch the threat itself

A business does not have to wait for fuel to become scarce before thinking about its costs. A refiner planning purchases, or a company budgeting for transport, may have to consider the possibility of higher prices.

Investors can do the same. If they expect higher costs to reduce a company’s future profits, they may pay less for its shares before those costs appear in its accounts. That is a change in expectations of future profitsMarket expectations and surprisesShare prices usually reflect what investors broadly expect. A known outcome can still move prices if it differs from those expectations, so the surprise often matters more than the news itself.View topic and related stories. It explains a possible response, rather than proving that oil caused any particular market movement in June.

The useful distinction is between a disruption already happening and a risk that could change future costs. Both can matter, but they require different evidence. Open shipping routes tell us oil can still move; they do not guarantee an unchanged price.

What to remember

• Prices can move before supplies stop. Buyers may pay more today if they fear oil will be harder to obtain tomorrow.
• Enough supply does not mean an unchanged bill. India can keep receiving oil while paying more for each barrel.
• The rupee matters alongside the oil price. A weaker rupee makes the same dollar purchase more expensive.
• The duration of a spike matters. A brief peak does not show what a country paid across a month, or what consumers paid at the pump.

Sources

Show 3 sources

1. US Energy Information Administration, “Amid regional conflict, the Strait of Hormuz remains critical oil chokepoint”, Today in Energy, 16 June 2025Accessed 19 Oct 2026 · Supports: Hormuz flow volumes, destinations, bypass capacity, absence of a traffic blockage, Brent $69 to $74.
2. US Energy Information Administration, “Petroleum prices reacted to economic and geopolitical uncertainty in the second quarter”, Today in Energy, 2025Accessed 19 Oct 2026 · Supports: Brent path in Q2 2025, 12-19 June rise, implied volatility, US and Iranian actions and the ceasefire, quarter-end $68.
3. All India Radio (Prasar Bharati), “Union Minister Hardeep Singh Puri assures India has adequate supplies of petroleum products for coming months amid West Asia conflict”, 14 June 2025Accessed 11 Oct 2026 · Supports: minister’s supply assurance (attributed), imported share of crude requirement.