While oil initially surged beyond US$81 ($103.76) a barrel, a healthy oil surplus kept prices under US$80/ barrel at the start of the week. Following the ceasefire, Brent slumped further below US$70/barrel, a “historically moderate range”, according to Schroders.
The much-feared scenario, however, is that Iran retaliates by closing the Strait of Hormuz, a sea passage critical to global oil transit. About 20 million barrels of oil, or a fifth of daily global production, flow through the Strait daily. While no single country owns the Strait, Iran controls its northern side.
Closing the Strait would send oil surging above US$100, according to Swiss investment bank Vontobel. A team led by commodities head Kerstin Hottner claims market polls have assigned a 30% probability that a shutdown occurs before the end of July.
Advisory firm Oxford Economics is even more bearish, claiming a reduced oil supply, higher shipping costs and a surge in the geopolitical risk premium could trigger a spike in oil prices to average US$115/barrel in 3Q2025 before falling back to US$75 by mid-2026.
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OCBC’s economists think a worst-case scenario would see Brent spiking to US$120/barrel before settling around US$100/barrel for the remainder of the year. Brent prices have not surpassed the US$100 mark since August 2022.
Morgan Stanley’s global commodities strategist Martijn Rats thinks disruptions to the Strait could force a repeat of 2022’s oil price shock, with prices reaching US$110 to US$120 per barrel.
Iran has threatened to close the Strait of Hormuz numerous times in the past and has taken action to prevent traffic. In 1988, Iran mined the Persian Gulf, damaging a US vessel and provoking a major US assault on Iran’s navy; in 2007 and 2008, there were naval stand-offs with the US; in late-2011 to early-2012, Iran again threatened to close the Strait; and in 2018 and 2019 it renewed these threats.
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However, the only way to completely close the Strait to all traffic would be via a naval blockade, and Oxford Economics’ global macro research director Ben May doubts Iran has the capability to achieve this, “even for a limited period of time”. “The US has said in the past that any attempt to do this would be seen as an act of war.”
Schroders’ senior economist George Brown and fund manager Malcolm Melville share this pessimism, noting that the Strait is a “comparatively wide channel” of international waters and cannot, in practice, be “closed”. “
More importantly, while Iran targeting shipping remains a theoretical risk, much of the oil passing through the Strait originates from Iran’s neighbours,” say Schroders’ analysts. “Disrupting the Strait of Hormuz would require aggressive action against international shipping, risking further isolation for Iran and the potential to draw other parties into wider conflict due to breaches of international maritime law.”
Even in an “unlikely scenario” where the Strait is completely closed, Oxford Economics estimates that “as much as one-third” of crude oil “could in time, be shipped via alternative routes”.
“In the most extreme case, the Iranian disruption would lower global oil supply by over 7%. But within three months, we estimate a pick-up in traffic through the Persian Gulf and rerouting would mean the hit to production was less than 1%,” writes May.
Julius Baer is more sanguine, with economics research head Norbert Rücker seeing oil prices “trading towards US$60 later this year”. “Although geopolitics and supply fears are at the forefront of people’s minds these days, oil prices are trading at almost half the levels seen in the 2010-2015 era after adjusting for inflation. We stick to our neutral view.”
Singapore counters in focus
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The back-and-forth throughout the week invigorated even the placid Singaporean investor. Mainboard-listed oil exploration and production company Rex International and upstream oil and gas company RH Petrogas were the two most-traded counters on June 24, with some 110 million and 56 million shares changing hands throughout the day.
That said, the heavy trading did little to move prices; Rex International and RH Petrogas closed largely flat on June 24. Granted, the counters had surged some 27% and 60% respectively over the past month.
To a lesser extent, shares in China Aviation Oil (Singapore) and Mermaid Maritime, which are both involved in oil, have also gained over the past month, rising around 6% and 14% respectively.
Other oil-related names listed on the Singapore Exchange are bogged down by other issues. For one, the insolvent oilfield services provider AusGroup was delisted last year.
Meanwhile, Mainboard-listed investment holding firm CH Offshore, which charters vessels, has been on the Watch-list since June 2023 after posting three consecutive years of losses. Its shares are down 30% over the past month.
Another Mainboard-listed petroleum explorer, Interra Resources, has been on the Watch-list since December 2017. Trading has also been suspended since February.
Analysts’ take on regional stocks
While the Singapore-listed names may be considered too small for broad analyst coverage, CGS International Research closely monitors Malaysian and Thai stocks.
CGSI analyst Raymond Yap has “add” calls on Dialog Group and Hibiscus Petroleum, which have “direct upstream exposure”.
In a June 23 note, Yap has target prices of RM2.58 (78 cents) for Dialog and RM2.60 for Hibiscus.
“As long as the Middle East war continues, the share price of pure upstream play Hibiscus will be the most sensitive to oil price movements, with a long-term correlation of 82%,” says Yap. “About 35% of Dialog’s patmi is also linked to its upstream business, although Dialog’s stable midstream earnings base tempers the earnings sensitivity. Every US$5/barrel rise in oil prices increases Hibiscus’ FY2026 patmi by 20% but only 3% for Dialog’s FY2026 [patmi].”
Yap is “overweight” on the Malaysia-listed oil and gas sector, with more “add” calls than “reduce”. “Oil and gas services companies [such as] Wasco, Dayang, Bumi Armada, Velesto and Yinson traditionally have a positive share price correlation with oil prices as higher oil prices may stimulate capex spending by exploration and production companies that may lead to more work.”
Conversely, Thailand-Cambodia tensions have hit oil and gas companies listed in Thailand. Cambodian Prime Minister Hun Manet has reportedly ordered a halt to Thai oil and gas imports.
CGSI analyst Amornrat Cheevavichawalkul issued “reduce” calls on PTT and PTT Oil and Retail Business on June 23. PTT, which owns 75% of PTT Oil and Retail Business, trades petroleum products with Cambodia via its trading arm in Singapore. PTT Oil and Retail Business derived THB1,241 million ($48.7 million) in ebitda from its petroleum and coffee sales in Cambodia in 2024.
