Global oil markets spiked on Tuesday following reports that Israel may be preparing a military strike on Iran’s nuclear facilities, according to U.S. intelligence cited by CNN. The news has heightened concerns over renewed instability in the Middle East, a region responsible for approximately one-third of the world’s oil supply.
While Brent crude for July delivery ended the session marginally lower, falling 0.2% to $65.38 per barrel, West Texas Intermediate (WTI) futures saw a sharper movement, surging as much as 3.5% to $64.19 a barrel.
CNN, quoting unnamed U.S. officials, reported that Israeli military and political leaders are in advanced stages of contingency planning. However, it remains unclear whether a final decision has been made to launch an attack on Iranian nuclear infrastructure.
The oil market has remained volatile in recent weeks amid mixed signals regarding the future of U.S.-Iran nuclear negotiations. Progress in the talks could result in the lifting of sanctions on Iranian crude exports, potentially flooding an already oversupplied market. A strike by Israel would significantly complicate those negotiations and inject fresh uncertainty into an already tense geopolitical landscape.
“There’s a difference between proxy battles and symbolic strikes versus an unmitigated attack, which is what the latest reports, if true, appear to potentially flag,” said Vishnu Varathan, Head of Macro Strategy for Asia ex-Japan at Mizuho Bank. “Previous conflicts involving Israel often displayed more restraint, partly due to the involvement and coordination of regional players, the U.S., and European powers.”
Adding to the uncertainty, Iran’s Supreme Leader, Ayatollah Ali Khamenei, on Tuesday expressed scepticism about the current negotiations with the United States, stating he did not expect any meaningful outcome.
Analysts warn that if sanctions on Iran’s oil exports are lifted, WTI prices could plunge to as low as $40 per barrel, according to Bloomberg Intelligence. Conversely, any military escalation involving Israel and Iran is likely to trigger a fresh rally in oil prices, as markets react to the risk of supply disruptions and regional instability.
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