Crude oil prices experienced a sharp downturn, plunging over 5% during peak trading hours and falling to their lowest levels in more than four years. West Texas Intermediate (WTI) crude dropped to $55 per barrel before slightly recovering to approach the $57 mark.
The slide in oil prices was triggered by the Organization of the Petroleum Exporting Countries (OPEC) announcing an increase in oil output by 441,000 barrels per day for the month of June. This production hike emerges at a time of deepening global economic uncertainty, particularly in light of continued ambiguity surrounding the trajectory of the U.S. economy and broader global trade dynamics.
Analysts at Goldman Sachs have projected an additional production increase by OPEC in July, estimating a further 410,000 barrels per day. Concurrently, the U.S. Energy Information Administration has forecasted that American crude output will hover around 13 million barrels per day through at least 2026.
Despite the former Trump administration’s attempts to ease restrictions on fossil fuel production, prevailing oil prices remain significantly below breakeven levels for many producers, thereby discouraging further investments or expansion of output, according to a Wall Street Journal report.
On the demand front, uncertainty continues to weigh heavily on market sentiment, exacerbated by ongoing volatility in international trade relations. Even after former U.S. President Donald Trump lifted tariffs on all countries except China and opened channels for de-escalating trade disputes, he retained a firm stance on maintaining certain tariffs. Talks between Washington and Beijing have yielded little progress, and China remains undecided on Trump’s proposal to cut tariffs to 145%.
Meanwhile, geopolitical developments over the weekend have raised fresh concerns. In an unprecedented move, Yemen’s Houthi rebels reportedly launched a missile that penetrated several layers of Israel’s advanced air defense systems, landing near Ben Gurion Airport. Israeli authorities pointed to Iran, which backs the Houthis, as the entity deserving of retaliation.
This escalation comes amid stalled U.S.-Iran nuclear negotiations—an impasse welcomed by Israeli Prime Minister Benjamin Netanyahu and his right-wing coalition, who favor a military strike against Iran. Such a development could draw the United States into a broader regional conflict.
The nature of the missile strike could strengthen Netanyahu’s case for military intervention, thereby undermining diplomatic efforts currently underway in Washington. A further escalation could jeopardize oil infrastructure across the Middle East and disrupt global maritime trade routes, potentially explaining why markets attempted to rebound from earlier losses.
Furthermore, the successful penetration of Israeli and U.S. air defense systems by the Houthi missile serves as a sobering reminder of potential vulnerabilities in the event of sustained attacks. This realization may influence policymakers to pursue de-escalatory measures or opt for a calibrated response, mirroring the reciprocal strikes exchanged between Iran and Israel at the end of the previous year.
