Oil Prices Surge as Israel and Iran Exchange Direct Military Strikes

Key Facts

Amid escalating geopolitical tensions in the Middle East, oil prices rose sharply in early European trade following a wave of direct military attacks exchanged between Israel and Iran. According to reports, this serious escalation of regional hostilities threatens the progress of a long-awaited peace deal in the region, triggering a significant risk premium. The direct conflict between these major regional powers has raised immediate concerns over the stability of global energy supplies and overall regional security.

This surge coincides with mixed global demand signals, as the U.S. ISM Manufacturing PMI reached 54 in June, beating the 53 forecast per market data. Additionally, the API Crude Oil Stock Change reported on June 2, 2026, showed a substantial draw of 6.75 million barrels, significantly higher than the expected 3.6 million barrel decline. These tightening inventory levels, combined with the military escalation, have provided a dual catalyst for the current bullish momentum in crude markets.

Traders should closely monitor further military developments and their impact on vital shipping lanes, alongside official government inventory reports. Key upcoming catalysts include the China Services PMI data scheduled for June 3, 2026, and scheduled central bank commentary, which will provide further clarity on the global economic growth trajectory and its subsequent impact on long-term energy demand.