following Israeli strikes on Iran but impact on
fundamentals limited
Retaliation from Iran highly likely, strong
response expected given Israeli attack severity
But energy market participants cautious on
longer-term escalation risks, citing regional
examples of geopolitical tension with limited
lasting price impact
Brent crude would need to near $100/bbl for
oil-linked LNG contracts to match current LNG
spot market prices
Unfolding situation further supports
already bullish picture for coming months
across energy markets
In the early hours of 13 June, Israel
launched a wave of attacks targeting Iran’s
nuclear programme, with strikes on nuclear
infrastructure as well as the killing of
scientists and military figures. Iran’s foreign
minister called the attacks a “declaration of
war” and vowed to retaliate.
ICIS experts share views on the potential
next steps and the future impact across the
energy complex.
Did the strike
take energy markets by surprise?
(Matthew Jones, Head of Power
Analytics) An Israeli strike on Iran’s
nuclear capabilities has been a significant
market risk for many months. Back in January,
we predicted this occurrence
in 2025. While there had not been much sign
of an impending attack in the first few months
of the year, there were reports in late May
that Israel was preparing a move, while the US
began to pull staff out of the Middle East on
Tuesday 10 June, after news emerged that
strikes could be
imminent. The exact timing was not clear,
but markets were aware of rapidly increasing
risk.
What price impact have we seen so far
across the commodity complex?
(Gemma Blundell-Doyle, Crude Market
Reporter) Oil prices spiked by almost 10%
on Friday morning, to their highest since
January this year. Brent crude reached
$78.48/barrel at 03:41 London time. At 14:30 it
remained elevated at $74.33/barrel.
(Rob Dalton, Senior Gas Market
Reporter) European gas prices rose on
Friday morning with the ICIS TTF front-month up
6% to €38.50 ($44.30)/MWh, a three-month high.
(Anna Coulson, Senior Power Market
Reporter) Bullish European gas supported
power prices, with the German front month
rising 2.2% from Thursday’s close to €82.75/MWh
by 13:50 on Friday.
(Ed Cox, Global LNG Editor) East Asian
LNG (ICIS EAX) spot prices rose 8% on Friday to
$13.43/MMBtu, the highest since March. Asian
spot prices have been increasing since early
June, in line with a firmer ICIS TTF.
forward curves 13 June 2025, Source: ICIS,
CME
Is the price impact risk-based, or have
we seen a direct impact on fundamentals so
far?
(Gemma Blundell-Doyle) Oil
fundamentals were on Friday afternoon
unchanged. The National Iranian Oil Refining
and Distribution Company said refining and
storage facilities had not been damaged and
continued to operate.
(Rob Dalton) The immediate,
price-driven response across the TTF was
fuelled by rising risk premiums and speculative
positioning, with particular concern
surrounding the shutdown of Israel’s offshore
gas fields. Market participants remain cautious
about the longer-term risks of escalation, with
many pointing to the 2024 Israel-Iran conflict
as an example of geopolitical tension with
limited lasting impact on pricing.
(Ed Cox) No immediate fundamental LNG
impact with outright spot LNG demand limited
from key Asian buyers, partly due to market
prices sitting well above oil-linked LNG
contracts.
LNG buyers closely monitor oil prices, which
are still used to price most Asian LNG
procurement. Most oil-linked contracts take a
historic oil price of at least three months
previous, so higher Brent today would impact
LNG contracts later in the year. Brent would
need to go closer to $100/bbl for oil-linked
LNG contracts to match current LNG spot prices
and to encourage buyers to switch to more spot
offtake.
ICIS understands that Egyptian fertilizer
producers have already shut down at least three
urea plants because of measures taken by Israel
to temporarily halt gas production. Israel
supplies over 30 million cubic metres/day of
gas to Egypt, which already faces major supply
shortages. Any extended reduction in Israeli
gas supply could mean Egypt has to buy
additional LNG cargoes to cover the shortage.
Egypt has recently committed to buy what could
be close to 10 million tonnes of LNG in 2025
and 2026 from a variety of sellers through
large tenders. It may call on the market for
additional cargoes which in turn could further
support global spot prices.
What next?
(Matthew Jones) You could see
different levels of response from Iran. The
least consequential would be similar to the
events of April 2024 playing out again, in
which Iran fires missiles and drones at Israel,
which shoots most of them down. Given Iran’s
weak position this cannot be ruled out.
But it seems more likely that Iran will attempt
a stronger response given the severity of the
Israeli attack. That could include attacks on
targets in the Persian Gulf, including on
tankers or oil refineries.
Iran could conclude that creating energy market
turbulence is the best way to get the US to
restrain Israeli action.
The most consequential response would be the
closing of the Straits of Hormuz through which
massive volumes of global oil and LNG travel.
Such an event would have major bullish
consequences for global energy markets but
should be seen as low probability as Iran will
be very reluctant to alienate key allies like
China. It would also be physically very
difficult for Iran to close the Strait even if
it wanted to.
(Ed Cox) For LNG, the narrative around
a potential Straits of Hormuz closure will
return, even if this would represent a major
further escalation from Iran with little
clarity on practical implementation.
Almost 20% of global LNG production will pass
through Hormuz from Qatar and the UAE in 2025
so the global LNG market will naturally focus
closely on events. LNG and wider shipping flows
via the nearby Suez Canal remain constrained
due to the risk of attack and there is limited
scope for a major impact on LNG shipping given
the large number of new vessels coming to the
market which is suppressing charter rates.
But we should expect major LNG buyers to
analyse current stocks and review emergency
supply security plans in response to these
events.
Global LNG exports and share of
trade using the Strait of Hormuz. Source:
ICIS
(Andreas Schroeder, Head of Gas
Analytics) A wider Middle East conflict
could have serious implications for Egyptian
gas markets. The country has switched to
becoming an importer of LNG since 2024 and is
set to increase imports going forward.
A major buy tender was issued recently. There
is now talk of around 100-110 cargos needed
overall in 2025 instead of the previously
expected 60-70. We forecast 6.3 million tonnes
of LNG imports, nearly tripling the 2.4 million
tonnes of 2024.
Egypt also receives LNG via pipeline from
Jordan’s Aqaba import terminal, which imported
0.8 million tonnes in 2024. In addition, Israel
is a major pipeline supplier to Egypt with
around 10 bcm/year covering a fifth of Egyptian
demand. Should a regional conflict escalate
further, an extended stop of Israeli gas
exports to Egypt could imply even stronger LNG
intake into Egypt for the remainder of 2025.
Egyptian LNG imports. Source:
ICIS
(Gemma) The US and Iran are set to
meet in Oman on 15 June to continue ongoing
nuclear talks. The Israeli strike on Iran will
be on the agenda. US president Trump has urged
Iran to make a deal regarding its nuclear
programme and to prevent further attacks from
Israel, bit it is unlikely Iran will concede
without retaliation.
Where could commodity prices go in
coming days and weeks?
(Ajay Parmar, Director, Energy &
Refining) We expect Iran to retaliate and
tensions to escalate further. This will likely
cause oil prices to remain elevated for the
coming weeks. If a resolution is found later
this month, prices could begin to retreat, but
for now, we see them remaining elevated in June
and July as a result of this escalation.
(Ed Cox) The TTF is ever more
influenced by geopolitical events given
Europe’s dependency on LNG imports. Often, TTF
volatility does not match changes in regional
gas fundamentals as traders are changing
positions to consider wider macro views. It is
possible the TTF could swing by 5-10% daily
while uncertainty over further escalation
continues.
Even though oil pricing plays a limited role in
European gas price formulation, it is likely
the TTF would follow higher Brent in the
context of an overall bullish energy market.
(Rob Dalton) Even before recent
developments, the near-term outlook for
European gas markets had already tilted bullish
due to a summer injection demand gap. An
escalating conflict would heighten the risk of
a broader move higher across the entire near
curve, placing increased emphasis on refilling
storage sites in the near term.
How does the news impact your broader
view of the current energy market
complex?
(Matthew Jones) We held a webinar on
12 June in which we presented a bullish view
for the European energy commodity complex in H2
2025. We see significant upside risk to prices
in the coming months, stemming from
expectations for rising carbon prices, gas
storage targets shifting volume risk to winter,
the potential continuation of low wind speeds
and fears over the return of stress corrosion
issues at French reactors.
The Israeli attack on Iran and the potential
consequences we have outlined here further
support that bullish picture for the coming
months.
(Ed Cox) From an LNG perspective, the
fundamental outlook from Asia is not strong in
the short term, largely due to weak economic
performance from China. European gas looks more
bullish. But the correlation between the TTF
and Asian spot LNG is strong with the potential
for prices in both markets to rise further on
Middle East concerns, even if the immediate
fundamental impact is focused on Israeli gas
supply to Egypt.