Not long ago, a missile launch in the Middle East would send oil prices surging. But the recent flare-up between Israel and Iran barely nudged the markets. On June 25, Brent crude hovered just above $85 a barrel —up less than 2% despite fears of a broader regional war. This muted reaction underscores a potential shifting in the dynamic: the Middle East, once the epicentre of oil price volatility, is losing its grip on global energy markets.
Several factors are behind this issue. First, the US has significantly boosted domestic production, reaching a record 13.2 million barrels per day in 2024. That’s up nearly 20% since 2019, effectively turning the US into a price-setter rather than a price-taker. Meanwhile, Canada, Brazil, and Guyana have expanded exports, diluting OPEC’s market power.
Second, the role of OPEC+ itself is under question. Saudi Arabia has repeatedly slashed output to prop up prices, but the effect is perceived only short term. Russia’s inconsistent adherence to production targets and Iran’s ability to bypass sanctions have also weakened the group’s coordination.
The broader context is one of energy diversification. Since Russia’s invasion of Ukraine, Europe has moved aggressively to reduce dependency on fossil fuels, with EU demand for oil down 5% since 2022. Renewables now cover more than 24% of Europe’s energy mix, and countries like Germany and France have accelerated electrification and storage infrastructure.
Market’s position
Investor behaviour is also reinforcing the trend. Oil futures volatility has dropped, and speculative bets on price spikes are rare. Hedge funds and commodity traders now treat Middle East tensions as background noise rather than catalysts for strategic shifts. That wasn’t the case during the 2011 Arab Spring or the 2003 Iraq invasion.
Still, the risks haven’t vanished. Disruptions at the Strait of Hormuz, through which 20% of global oil flows, could still shake markets. For fintechs and institutional investors, this decoupling means geopolitical headlines are no longer reliable signals for energy trades. Portfolio strategies need to factor in fundamentals over fear.
