Oil markets began the week on edge as fears mounted over a potential closure of the Strait of Hormuz following U.S. airstrikes on Iranian nuclear sites. Brent crude futures briefly spiked to $81.40 per barrel on Monday, a five-month high, as geopolitical risk premiums surged in anticipation of Iranian retaliation. However, the market reaction quickly reversed. Rather than disrupting critical shipping lanes, Iran opted for a targeted strike on a U.S. military base in Qatar, prompting a swift correction. By the close of the day, Brent had shed over $5 to finish at $71.48, a 7.2 percent drop, with WTI recording a similar loss.
The pullback deepened after Israel and Iran agreed to a ceasefire, bringing a two-week flare-up to an end. With no material disruption to oil or gas flows through the Strait – responsible for nearly 20 percent of global seaborne energy exports – prices collapsed further. Brent briefly fell below $67 a barrel on Tuesday before clawing back some ground in later sessions. By Friday, oil benchmarks were on track for their steepest weekly decline since March 2023. Markets effectively unwound the entire risk premium built up since Israel initiated the conflict on June 13. The rapid swing in sentiment highlights the structural shifts in global energy dynamics: even in a region long synonymous with supply shocks, today's markets appear far less reactive. Improved logistical resilience, diversified sourcing, and strategic reserves have diminished the dominance of Middle East politics in shaping oil price trajectories.
This sense of balance – if not complacency – has also characterized the iron ore market, where prices have remained tightly rangebound. Since early June, the benchmark price has oscillated between $91 and $95 per tonne, reflecting a market caught between weak Chinese construction demand and consistent restocking activity from processors and traders. The near-term picture remains one of stasis, with little to disrupt the current equilibrium. Yet beneath the surface, questions are mounting about the sustainability of Chinese steel production in the second half of the year. The outcome will hinge on a delicate interplay between policy direction, the pace of real estate stabilization, and seasonal supply-side variables such as weather-related disruptions in major exporting regions.
Production data released this week did little to shift sentiment. Global crude steel output fell by 3.8 percent year-on-year in May, totaling 158.8 million tonnes across the 70 reporting countries. China’s contribution declined by 6.9 percent to 86.6 million tonnes, as the country continues to wrestle with a deep property downturn and an ongoing campaign to rein in excess capacity. India, by contrast, remains an outlier, with production up 9.7 percent year-on-year amid steady infrastructure expansion and industrial growth. North and South America also posted modest gains, while Europe continued to lag due to elevated energy costs and anemic industrial activity. Other regions, particularly the Middle East and Africa, showed relative resilience, adding to the increasingly divergent regional landscape in global steel production.
A divergence is mirrored in China’s broader industrial performance as well. After two months of marginal gains, industrial profits contracted sharply again in May, falling 9.1 percent year-on-year. The decline reflects not only softer factory output but also deepening deflationary pressures and a still-precarious domestic demand environment. For the January – May period, profits dropped 1.1 percent compared to a year earlier, reversing the modest 1.4 percent growth recorded in the first four months of 2025. The National Bureau of Statistics attributed the downturn to weak end-user demand, declining product prices, and volatile short-term factors. Deflation at both the producer and consumer level continues to signal underlying fragilities in China’s post-Covid recovery, keeping expectations for industrial momentum muted.
In parallel with the broader economic picture, the Capesize segment experienced a swift shift in tone over the course of June. The first half of the month saw a sharp rally, with average earnings climbing to nearly $31,000 per day – an eleven-month high. The surge was driven by a combination of strong iron ore exports out of Brazil and tight tonnage supply in the Atlantic basin. However, the rally faltered just as quickly. In the second half of June, the Baltic Capesize TC index gave back much of its earlier gains, falling to $18,408 per day. While still above the year-todate average, the pullback served as a reminder of how fragile current fundamentals remain. The market continues to rely heavily on sporadic bursts of demand, with little in the way of structural support to sustain higher rates for long.
Looking across markets, a shared theme emerges: fragility beneath apparent stability. Oil prices may have shrugged off geopolitical fears, but only because actual supply flows remained uninterrupted. Iron ore is holding steady, sustained by a delicate balance between weak demand and routine restocking. Capesize rates rallied, then corrected, illustrating just how sensitive the freight market is to even short-lived shifts in cargo flow. In each case, markets are walking a narrow path, vulnerable to tipping either way. With Chinese demand clouded by deflation and industrial weakness, and global sentiment tethered to volatile macroeconomic signals, a durable trend – whether in commodities or freight – remains elusive. The second half of the year may yet deliver stronger momentum, but for now, markets appear stuck in a state of watchful hesitation.
Data source: Doric