Why Oil Prices Fell After Iran's Missile Strike

Forbes

23-06-2025

ANKARA, TURKIYE - JUNE 23: An infographic titled "Iran launches missile attack on US base in Qatar" ... More created in Ankara, Turkiye on June 23, 2025. (Photo by Mehmet Yaren Bozgun/Anadolu via Getty Images)
On Monday June 23, 2025, Iran launched a missile strike on the U.S. Al-Udeid Air Base in Qatar—a retaliatory move following U.S. airstrikes on Iranian nuclear facilities over the weekend. Explosions were reported near Doha, and additional strikes were reported against American assets in Iraq.
We would normally expect such developments to send oil prices soaring. Instead, crude prices fell by 6% in late Monday trading.
That decline may seem puzzling at first. After all, this was a direct Iranian attack on the largest U.S. military base in the Middle East. But the market's response makes more sense when viewed through the lens of risk pricing and investor psychology.
A Measured Strike, Not an Escalation
According to New York Times reporter Farnaz Fassihi, Iranian officials coordinated the strike in advance with Qatari authorities and provided notification of the timing and targets. Sources familiar with the plan described it as a symbolic response designed to avoid significant escalation.
This mirrors Iran's approach in 2020, when it warned Iraq before launching missiles at U.S. forces following the killing of General Qassem Soleimani. In both cases, the objective was to signal strength while minimizing the chance of escalation into uncontrollable conflict.
Oil markets appear to have interpreted that restraint as a sign that significant escalation is unlikely in the short term. It's also a sign that Iran will likely not follow through on threats to close the Strait of Hormuz--a move that would be viewed as a major escalation. The fact that oil prices fell sharply after the news broke also indicates that traders viewed the immediate threat of a widening war as diminished.
Risk Premium Evaporates—For Now
In the lead-up to Iran's response, oil prices had risen on fears of a significant response. But once the strike materialized and appeared measured, the market began to unwind that risk premium.
This pattern isn't unusual. In past crises—from the U.S. invasion of Iraq to tensions around the Strait of Hormuz—prices often rise ahead of military action and fall once the scope becomes clearer. Traders price in fear and then correct as uncertainty gives way to clarity.
The Fragile Reality
The price response also reflects a market that assumes rational actors remain in control. That assumption, however, carries its own risks. If either side miscalculates or if a future attack causes significant casualties, conditions could shift quickly and unpredictably.
There's also the unique geopolitical role of Qatar to consider. As host to U.S. forces, a diplomatic partner to Iran, and one of the world's largest LNG exporters, Qatar occupies a precarious middle ground. Monday's strike—though intercepted—highlights that fragile balance.
Bottom Line
Oil prices fell after Iran's missile strike because the market interpreted the move as symbolic rather than escalatory. That reading may prove accurate—for now. But in a region where history shows how quickly tensions can spiral, any sense of calm remains tentative.
For traders, energy executives, and policymakers alike, the key reminder is this: what drives the market is generally what investors believe will happen next.