Middle East Tensions Raise Risks – But Oversupply Could Keep Prices in Check 

Geopolitical Tensions on the Rise: What’s the Impact on Oil Markets? 

A ceasefire was recently reached between Israel and Iran, yet tensions flared again after the U.S. launched airstrikes on Iranian nuclear sites. In response, Iran threatened to close the Strait of Hormuz—a key passage for global oil shipments. 

Here are three key points to help put the situation into perspective: 

• Limited Immediate Impact: Iran accounts for only 3% of global crude supply and exports just half of that. Shutting down Hormuz would hurt its own economy. 

• Strategic Reserves Are Ready: OECD countries hold 1.2 billion barrels in reserves—enough to cover up to 60 days of exports through Hormuz. 

• Oversupply Ahead: Global demand is expected to grow by less than 1% this year, while supply could grow more than three times as fast, driven by Brazil, Norway, and adjustments in OPEC+ output. 

Market Implications 

S&P 500 companies have very limited direct exposure to Iran and Israel. In the short term, market sentiment may drive volatility. But from a broader perspective, oil market fundamentals remain relatively balanced. 

Over the past 30 years, markets have shown resilience. Following similar geopolitical events, the S&P 500 has delivered an average return of nearly 8% over the next 12 months. 

Source: Raymond James