U.S. President Donald Trump’s latest threats to bomb Iran, again, have pushed Brent crude prices back above US$70/bbl for the first time since back in August CY25, which in turn is helping Australian energy stocks.
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Woodside (ASX:WDS), Santos (ASX:STO), and Beach Energy (ASX:BPT) have all been posting modest 1W gains (though earnings season is also a factor), and as at 1pm AEDT, Brent crude prices had notched further modest gains.
This all comes despite the fact that investment theses suggesting a U.S. attack on Iran would disrupt crude supply, thereby making it more expensive, doesn’t really make sense in the modern world of CY26.
That thesis is from the genetic memory, if you will, of the 1970’s U.S.-Iran oil crisis, which saw the Middle Eastern Petrostate squeeze the USA’s vehicle fuel supply – something that wouldn’t happen today.
That is a whole lot less likely to happen today because the U.S. economy is sort of its own petrostate these days. The USA is now the world’s largest producer of oil and gas; it is ahead of Saudi Arabia and Russia.
Iran, in fact, does not even enter the top five list of oil-producing nations by daily output these days. Even Canada is ahead of Iran – not that Canada isn’t a goliath energy powerhouse in its own right, but it’s the kind of factoid the oil trading market, apparently, often fails to recognise.
So what can we make of that? I have a feeling it’s probably an indication of the age of some participants in oil trading, and think it’s a favoured phenomenon for oil traders (read: easy money every time there’s trouble in the Middle East.)
To be fair, while the U.S. can protect its own oil capacity, that doesn’t necessarily mean the rest of the world would benefit from U.S. supply. Brent Crude is differentiated from the WTI Crude benchmark in that the former matters more internationally.
The Brent Crude price is more of a leading indicator for Australian fuel prices at the servo, for instance. WTI basically reflects internal U.S. prices.
And so in that context, a rising Brent price does make sense. Iran’s largest oil export market is China; it also pumps the black gold for the UAE and Venezuela.
But now Venezuela’s oil industry is a de facto U.S. operation, too. And when it comes to China, their slowing economy over the last four years is a large part of why the Brent price has stayed under US$80/bbl.
So the relationship between geopolitical flare-ups in the Middle East and the Brent Crude price has a lot of problems, but don’t expect anybody to listen. I’ve been saying it for years.
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