June 25, 2025 | Israel – Iran War Over – Maybe Or Maybe Not?

Summary:

Israel and Iran Keep Fragile Ceasefire After Devastating 12-Day War!:

Crude oil has taken a quick round trip from US$59.74/b in late May to US$78.40/b late last week as Israeli and then US B2 bomber attacks knocked out the key nuclear weapons infrastructure facilities. Then when this operation was completed crude retreated to US$64/b (this morning US$64.90/b).

The good news:

• The US has pushed both countries to accept a ceasefire and now head for diplomatic solutions to end the war.
• The Iranian facilities to make more weapons grade nuclear material have been mostly destroyed. Israel told the US that they had sent in agents and they confirmed that the Fordo site saw ‘total obliteration’. Iran today said that their facilities had been devastated but maybe not fully destroyed. We see mixed messages on the level of destruction and current capabilities of Iran.
• Iran’s military and ballistic missile systems have been severely degraded.
• To entice Iran to move to the diplomatic solution President Trump has offered to remove all sanctions against crude oil sales. Iran produced 3.3 Mb/d in May 2025 and could lift this quickly to 3.8 Mb/d. Peak production was over 6 Mb/d during the mid to late 1970’s before the Iranian Revolution. Right now China is the largest buyer of Iranian crude at 1.8 Mb/d (80% of Iranian production). An important carrot incentive to an impoverished country.
• A leadership vacuum has developed in Iran and the current Supreme Leader is ill and there are candidates that could take over that will be less militant and jihadist.

The bad news:

• Intelligence reports indicate that Iran moved high grade uranium stocks from the attacked facilities before the air attacks by Israel and the US. They may not have centrifuges to make more but what they have could make up to 10 suitcase bombs with 880 pounds of enriched uranium that their terrorist proxies could use. Reports state that 16 cylinders (about the size of large scuba tanks) were removed from sites before the bombings. These cylinders could be hidden for some time and later used to create weapons for long range missiles.
• Sleeper cells may be activated by Iran and her IRGC handlers and we may see this erupt some time this summer. The FBI and other US security agencies are on high alert. So far 16 Iranians on the US terrorist watch list have been arrested in recent days.

So could crude oil rise up to above US$80’s/b or breach US$60/b? We go over these possibilities below.

Stocks in general have 15-20% downside with the tech area being the most vulnerable. They have led this recent market rally and are trading at nosebleed all time high valuations. Another great buy window as we saw in early April should be seen during July. Get ready to add your favourite energy ideas when we send out the next BUY signal.

This week’s Eye On Energy Details:

Current Challenges:

Challenges for President Trump and his administration over his second 100 days will be tough: He needs success on these issues before the end of this timeline:

• Get the Senate to pass an extension of the debt ceiling and raise it by US$4T to US$41T.
• Be able to fund the current deficit and renew maturing Treasury issues when foreign investors worry about US trade policy and support of NATO. China and Japan have been selling some of their substantial Treasury issues. Near term rates have come down due to the success in Iran and crude prices retreating.
• Get his tax cuts permanently approved. The Senate now has the “Big Beautiful Bill” and they may not acquiesce to the House version and get a final bill to President Trump before July 4th (Independence Day). This date is now unlikely and the chatter is that it may take into August to get the bill on his desk for signing. This could be a stock market problem (smackdown potential) if delayed further or a deal is not done between the Senate and the House. The State and Local tax issue (SALT) is a battle between high tax Blue and low tax Red States.
• Show that he can cut wasteful government spending. The current deficit looks to be US$2.2T for this fiscal year and could go higher in coming years if the growth forecast assumed by the bill does not occur. The current deal looks to add US$30T to the deficit over the next 10 years. The Moody’s rating downgrade from ‘Triple A’ was a blow but so far has not raised interest rates to get required funds. Markets are watching to see how upcoming Treasury offerings do. So far so good! But interest rates payments are now over US$1T and rising as much of the debt raised 2,3 and 4 years ago was at much lower cost and the renewal will add to the rising interest cost to the budget.
• Get Congressional approval to close down government departments, regulations and staffing. So far President Trump’s moves have been halted by Judge rulings. Congress passing such legislation would allow for contraction of the Federal force and departments.
• President Trump’s volatile moves on tariffs have had a strong impact on stock markets. The latest on-off of 50% for the EU is just one such market mover. The delay to July 9th means that 27 EU countries need to agree to harsh trade changes. For Germany that means for autos and for France food and wine. We are skeptical that this can be done. So far no tariff deal has been made and signed. The one that has initial agreement is with the UK but insufficient papering of the deal. His threat against Apple of 25% tariffs on imported cell phones to force them to move manufacturing to the US awaits Apple’s response. Other cell phone manufacturers may face the same increase in tariff rates.
• Get peace negotiations started between Russia and Ukraine and a ceasefire implemented to end the weekly death toll exceeding 5,000 personnel from both sides (military and civilian).
• Negotiations with China are not moving well and China has put a six-month limit on its ease of rare-earth export licenses to keep pressure on the US.

I remain concerned that other Geopolitical Challenges could take place and be the ‘Black Swan’ to take the general stock markets to our downside targets.

Our expected downside targets are:

• Dow Jones Industrials Index 35,000 (now 43,019)
• S&P 500 4,800 now (now 6,099)
• NASDAQ 13,000 (now 19,992)
• S&P/TSX Energy Index 230 (now 267 and down from 281 last week)
• WTI US$56-58/b (now US$64.90/b and down from US$75/b last week )

We see WTI having the potential to rise again and the potential issues that could drive prices upward are:

• If there was a material release of radioactive materials from the bombed out Iranian facilities.
• If Iran attacked shipping (crude oil carriers) leaving the Gulf Of Hormuz. Over 18 Mb/d travel this route. Other choke points they could attack are the Bab el-Mandeb and the Suez Canal.
• If Iran mined the entrance to the Straits stopping all shipping.
• If Iran or its proxies attacked US warships or US military personnel in the Middle East area.
• If sleeper cells make an attack from within the US.
• Global growth in late 2025 into 2026 exceeds supplies (Venezuela sanctions impacting as well).
• Lack of production growth around the world.

To see WTI crude prices back below US$60/b (US$56/b-US$58/b our target) would require an official end to the Israel/Iran war and Iran signs a surrender that includes ending support for global terrorism. Regime change is unlikely during this phase. That would be up to the Iranian people after the deal is done.

The Trump tariffs have still not been seen by customers as inventories of current stock need to be sold and then new imported items will carry the tariffs and become relatively expensive. This is now expected to hit stores during July. Both Walmart and Target have warned of the cost of new inventory. Some economists see tariff prices impacting households by US$2,800 by year end.

Josef Schachter June 25th, 2025

Posted In: Schachter's Eye On Energy

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