27th June 2026
It does seem counterintuitive. Normally, renewed military exchanges between the US and Iran would push oil prices higher. This time, however, traders are looking beyond the headlines and focusing on whether oil supplies are actually being disrupted.
Oil Price dips below $72 - 9.00am 27 June 2026
The main reasons oil prices have continued to fall are:
No major loss of oil supply (so far)
Although Iran and the US have exchanged further attacks, neither side has significantly reduced global oil production. Markets care far more about whether millions of barrels per day disappear than about military action itself. Recent strikes have been seen as limited rather than the start of a full-scale regional war.
The Strait of Hormuz is still functioning
Earlier this year the biggest fear was that the Strait of Hormuz would remain closed for an extended period. Around one-fifth of globally traded oil normally passes through it.
Despite the latest incident involving a commercial vessel, tankers have gradually resumed using the route, and shipping volumes are increasing. As long as oil keeps moving, traders remove much of the "war premium" from the oil price.
The market had already priced in worse news
Oil had risen sharply when the conflict escalated. Once it became clear that exports from major producers such as Saudi Arabia, United Arab Emirates and others were not being halted, many speculative traders sold their positions.
In markets there is an old saying:
"Buy the rumour, sell the fact."
The feared disruption simply hasn't happened on the scale investors expected.
Global demand remains weak
The other side of the equation is demand.
There are continuing concerns about:
slower economic growth in China,
subdued manufacturing activity in Europe,
only moderate fuel demand in many advanced economies.
If demand is soft, the market can absorb geopolitical shocks much more easily.
Producers can increase output if needed
Markets also believe that producers have spare capacity.
If prices began rising sharply again:
OPEC+ could increase production,
US shale producers would likely drill more wells,
governments still have strategic petroleum reserves available in an emergency.
Those factors reduce fears of a prolonged shortage.
What could make prices jump again?
The market is far from relaxed. Any of the following could quickly send Brent crude back above $80–90 per barrel:
Iran successfully blocks the Strait of Hormuz again.
Oil terminals or export pipelines in Gulf states are damaged.
Saudi Arabian or UAE production is interrupted.
Large numbers of tankers stop sailing because insurers withdraw cover.
The conflict spreads to other major oil-producing countries.
What this means for the UK
For the UK, the recent fall is encouraging because it should eventually feed through to:
lower petrol and diesel prices,
reduced wholesale gas costs,
easing inflation later in the summer,
less pressure on the Bank of England to keep interest rates higher for longer.
There is usually a lag of several weeks before lower crude prices fully appear at the pumps.
The oil market is increasingly reacting to actual physical supply rather than dramatic headlines. Traders are asking, "Has the world lost any barrels of oil today?" If the answer is "not really," prices tend to fall back even while missiles are still being exchanged. That is quite a change from previous Middle East crises, when geopolitical risk alone could keep prices elevated for weeks.