Israel - Iran War Over - Maybe Or Maybe Not?

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Summary:

Israel and Iran Keep Fragile Ceasefire After Devastating 12-Day War!:

Crude oil has taken a quick round trip from US$59.74/b in late May to US$78.40/b late last week as Israeli and then US B2 bomber attacks knocked out the key nuclear weapons infrastructure facilities. Then when this operation was completed crude retreated to US$64/b (this morning US$64.90/b).

The good news:

• The US has pushed both countries to accept a ceasefire and now head for diplomatic solutions to end the war.

• The Iranian facilities to make more weapons grade nuclear material have been mostly destroyed. Israel told the US that they had sent in agents and they confirmed that the Fordo site saw ‘total obliteration’. Iran today said that their facilities had been devastated but maybe not fully destroyed. We see mixed messages on the level of destruction and current capabilities of Iran.

• Iran’s military and ballistic missile systems have been severely degraded.

• To entice Iran to move to the diplomatic solution President Trump has offered to remove all sanctions against crude oil sales. Iran produced 3.3 Mb/d in May 2025 and could lift this quickly to 3.8 Mb/d. Peak production was over 6 Mb/d during the mid to late 1970’s before the Iranian Revolution. Right now China is the largest buyer of Iranian crude at 1.8 Mb/d (80% of Iranian production). An important carrot incentive to an impoverished country.

• A leadership vacuum has developed in Iran and the current Supreme Leader is ill and there are candidates that could take over that will be less militant and jihadist.

The bad news:

• Intelligence reports indicate that Iran moved high grade uranium stocks from the attacked facilities before the air attacks by Israel and the US. They may not have centrifuges to make more but what they have could make up to 10 suitcase bombs with 880 pounds of enriched uranium that their terrorist proxies could use. Reports state that 16 cylinders (about the size of large scuba tanks) were removed from sites before the bombings. These cylinders could be hidden for some time and later used to create weapons for long range missiles.

• Sleeper cells may be activated by Iran and her IRGC handlers and we may see this erupt some time this summer. The FBI and other US security agencies are on high alert. So far 16 Iranians on the US terrorist watch list have been arrested in recent days.

So could crude oil rise up to above US$80’s/b or breach US$60/b? We go over these possibilities below.

Stocks in general have 15-20% downside with the tech area being the most vulnerable. They have led this recent market rally and are trading at nosebleed all time high valuations. Another great buy window as we saw in early April should be seen during July. Get ready to add your favourite energy ideas when we send out the next BUY signal.

This week’s Eye On Energy Details:

Current Challenges:

Challenges for President Trump and his administration over his second 100 days will be tough: He needs success on these issues before the end of this timeline:

• Get the Senate to pass an extension of the debt ceiling and raise it by US$4T to US$41T.

• Be able to fund the current deficit and renew maturing Treasury issues when foreign investors worry about US trade policy and support of NATO. China and Japan have been selling some of their substantial Treasury issues. Near term rates have come down due to the success in Iran and crude prices retreating.

• Get his tax cuts permanently approved. The Senate now has the “Big Beautiful Bill” and they may not acquiesce to the House version and get a final bill to President Trump before July 4th (Independence Day). This date is now unlikely and the chatter is that it may take into August to get the bill on his desk for signing. This could be a stock market problem (smackdown potential) if delayed further or a deal is not done between the Senate and the House. The State and Local tax issue (SALT) is a battle between high tax Blue and low tax Red States.

• Show that he can cut wasteful government spending. The current deficit looks to be US$2.2T for this fiscal year and could go higher in coming years if the growth forecast assumed by the bill does not occur. The current deal looks to add US$30T to the deficit over the next 10 years. The Moody’s rating downgrade from ‘Triple A’ was a blow but so far has not raised interest rates to get required funds. Markets are watching to see how upcoming Treasury offerings do. So far so good! But interest rates payments are now over US$1T and rising as much of the debt raised 2,3 and 4 years ago was at much lower cost and the renewal will add to the rising interest cost to the budget.

• Get Congressional approval to close down government departments, regulations and staffing. So far President Trump’s moves have been halted by Judge rulings. Congress passing such legislation would allow for contraction of the Federal force and departments.

• President Trump’s volatile moves on tariffs have had a strong impact on stock markets. The latest on-off of 50% for the EU is just one such market mover. The delay to July 9th means that 27 EU countries need to agree to harsh trade changes. For Germany that means for autos and for France food and wine. We are skeptical that this can be done. So far no tariff deal has been made and signed. The one that has initial agreement is with the UK but insufficient papering of the deal. His threat against Apple of 25% tariffs on imported cell phones to force them to move manufacturing to the US awaits Apple’s response. Other cell phone manufacturers may face the same increase in tariff rates.

• Get peace negotiations started between Russia and Ukraine and a ceasefire implemented to end the weekly death toll exceeding 5,000 personnel from both sides (military and civilian).

• Negotiations with China are not moving well and China has put a six-month limit on its ease of rare-earth export licenses to keep pressure on the US.

I remain concerned that other Geopolitical Challenges could take place and be the ‘Black Swan’ to take the general stock markets to our downside targets.

Our expected downside targets are:

• Dow Jones Industrials Index 35,000 (now 43,019)

• S&P 500 4,800 now (now 6,099)

• NASDAQ 13,000 (now 19,992)

• S&P/TSX Energy Index 230 (now 267 and down from 281 last week)

• WTI US$56-58/b (now US$64.90/b and down from US$75/b last week )

We see WTI having the potential to rise again and the potential issues that could drive prices upward are:

• If there was a material release of radioactive materials from the bombed out Iranian facilities.

• If Iran attacked shipping (crude oil carriers) leaving the Gulf Of Hormuz. Over 18 Mb/d travel this route. Other choke points they could attack are the Bab el-Mandeb and the Suez Canal.

• If Iran mined the entrance to the Straits stopping all shipping.

• If Iran or its proxies attacked US warships or US military personnel in the Middle East area.

• If sleeper cells make an attack from within the US.

• Global growth in late 2025 into 2026 exceeds supplies (Venezuela sanctions impacting as well).

• Lack of production growth around the world.

To see WTI crude prices back below US$60/b (US$56/b-US$58/b our target) would require an official end to the Israel/Iran war and Iran signs a surrender that includes ending support for global terrorism. Regime change is unlikely during this phase. That would be up to the Iranian people after the deal is done.

The Trump tariffs have still not been seen by customers as inventories of current stock need to be sold and then new imported items will carry the tariffs and become relatively expensive. This is now expected to hit stores during July. Both Walmart and Target have warned of the cost of new inventory. Some economists see tariff prices impacting households by US$2,800 by year end.

If you want to see our Action Alert BUYS, sign up now for access to the Schachter Energy Research reports at https://bit.ly/2FRrp6k.

Bullish pressure for crude prices comes from:

1. US Tariffs on imports would raise prices for consumers and businesses. We now need to wait for upcoming data to see what occurs.

2. Venezuela sanctions started on May 27th. Production could now fall from over 1M b/d to less than half that number tightening global supplies.

Bearish pressure for crude comes from:

1. Demand weakness in many European OECD economies. Germany is in a recession and it is the biggest economy in the EU.

2. US and China demand for crude and products is not growing and for some products are declining versus 2024 consumption.

3. The US was an exporter of crude 4.27 Mb/d last week.

EIA Weekly Oil Data:

The EIA data for last week was a positive report as Total Stocks fell 3.9 MB to 1633.2 Mb. Commercial Stocks fell 5.8 Mb to 415.1 Mb while the SPR rose 0.2 Mb to 402.5 Mb. Motor Gasoline Stocks fell 2.1 Mb while Distillate Fuel inventories fell 4.1 Mb. Exports fell 91 Kb/d to 4.27 Mb/d and are up 360 Kb/d from 3.91 Mb/d last year. Refinery Utilization rose 1.5% to 94.7% compared to 92.2% this time last year.

US Production rose 4 Kb/d to 13.44 Mb/d and is up 235 Kb/d from last year. Overall product demand rose 129 Kb/d to 20.51 Mb/d, as Motor gasoline demand rose 389 Kb/d to 9.69 Mb/d. Jet fuel demand fell 108 Kb/d to 1.71 Mb/d as airlines cut back flights due to lower demand. Cushing Inventories fell 0.5 Mb to 22.2 Mb. This is below the 2024 level of 33.9 Mb.

Overall US demand is up modestly from 2025 at 0.7% to 20.08 Mb/d up from last year’s 19.94 Mb/d while Gasoline demand is up for the year by 0.2% to 8.74 Mb/d from last year's 8.72 Mb/d.

In late July prices should retreat to the low US$60’s and if demand is weak this summer as consumers restrain from travel then we could see a test of the April lows. We expect to get our next BUY signal at this time. In Q4/25 crude prices should lift to US$75/b and energy related stocks should be great performers as global demand picks up and Venezuela sanctions take hold.

EIA Weekly Natural Gas Data:

Last week there was an injection of 95 Bcf. This raised storage to 2.80 Tcf with the biggest increase coming in the East area at up 32 Bcf. NYMEX is now at US$3.50/mcf, a great price for this time of year before moving higher as the summer heat brings on strong air-conditioning demand. In 2024 there was a 71 Bcf injection and for the five-year average, injection was 59 Bcf. US Storage is now 7.7% below last year’s level of 3.04 Tcf and 6.1% above the five year average of 2.64 Tcf.

We recommend buying the very depressed natural gas stocks during periods of market weakness. Natural gas stocks are very cheap now. We see much much higher gas prices in Q4/25 as quite a number of new LNG plants come onstream over the next 12 months; one in Canada and two in the US. In Canada the first train of LNG Canada shipped its first cargo on to the LNG tanker Gaslog Glasgow, and will ramp up production throughout the year. In the US Corpus Christi Stage 3 begins production of LNG (1.5 Bcf/d). In 2025, Golden Pass LNG is bringing on the first two trains of this new three train export facility. US LNG exports reached a high in recent months of 15.8 Bcf/d.

AECO is trading at <C$1.00/mcf a normal sloppy summer price level. We look for AECO to rise to over C$3.00/mcf in Q4/25 and over C$3.50/mcf during winter 2025-2026. Operators can hedge all of their 2026 production now at C$3.40/gj. Higher prices should come as more LNG plants are planned for the BC coast. LNG tankers are being redirected from Asian customers to Europe as prices are much higher there. European natural gas prices are around US$17/mcf (versus US$13/mcf in Asia) as storage is depleting quite quickly. European inventories are low for this time of year’s stock rebuild. Rebuilding storage to the required 90% level by November 1st for winter 2025-2026 will be a big challenge across Europe and should keep import prices high.

Catch the Energy Conference:

We are working away on getting our Presenters for this year’s conference. Below are those already signed up with confirmation forms in. We have met with other companies and will update this list as their confirmations come in. We have room for 45 companies and there are slots still available. SER subscribers always get two complimentary tickets so please put the event in your calendar for October 18, 2025 if you can come to Calgary. Tickets start being allocated in August.

If you know of any companies with great stories and are public companies then have them reach out to me and we can meet them and see if the company would resonate with our attendees. We expect to have over 800 attendees this year versus just over 700 last year. My contact information is josef@sersinc.ca.

Baker Hughes Rig Data: In the data for the week ending June 20th, the US rig count saw a decrease of 1 rig to 554 rigs. US Rig activity is now 5.8% below the level of 588 rigs working last year. Of the total US rigs working last week, 438 were drilling for oil and this is 9.7% below last year’s level of 485 rigs working. The natural gas rig count is up 13.2% from last year's 98 rigs, now at 111 rigs. Companies remain financially disciplined despite the Trump administration edict to ‘drill baby drill’. WTI will need to exceed US$80/b for some time before drilling activity picks up materially for crude production to reach new all time highs. Natural gas needs to be over US$4.00 for NYMEX to incentivize natural gas drilling activity on a consistent basis. President Trump is in glee over the lower price of crude and lower gasoline prices; one of his election promises. In Canada, there was a 1 rig increase to 139 rigs. This rig activity rate is now down 16.2% compared to last year’s 166 rigs. There were 93 rigs drilling for oil last week down 14.7% from 109 last year. Drilling for natural gas was down 19.2% from 57 rigs to 46 rigs.

Energy Stock Market: The S&P/TSX Energy Index today is at 267 (down 14 points from last week) as crude prices have plunged and the war premium disappeared. The sector is near term retreating from its overbought level and I expect a further 10-15% correction.

We like to BUY when stocks are cheap and being ignored. Bargains are clearly being seen now. Late July should provide the next great window to add to favourite positions at prices 10% lower than today. Investors should decide what you want your energy weighting to be for this long energy super cycle. Our BUY List includes ideas from the Pipeline/Infrastructure/Royalty area, Canadian oil and natural gas ideas, energy service ideas and companies working internationally. Our list includes large Conservative ideas and small to large caps in our Growth and Entrepreneurial categories. Add to your current ideas or add new ideas. We expect global demand should exceed supplies at that time. We see WTI prices above US$80/b consistently during 2026.

We are working on our next SER Monthly that should be out to paid SER subscribers on July 4th. It will include the last 10 energy companies that we cover. Many of the companies have had very good results and we have raised our stock price targets for those over achievers. Of note some have missed our forecast and we have lowered our outlooks and stock prices. Longer term these companies have strong potential but recent market weakness has focused management attention on the balance sheet and not growth. If you are interested in independent analysis of the energy sector and to see our Balance of Evidence sections then become a subscriber. https://schachterenergyreport.ca/subscriptions/

CONCLUSION:

Longer term we remain very bullish. Our view remains that before the end of this decade we expect to see WTI prices exceeding the high in mid-2008 of US$147.27/b. During Q4/25 we expect to see WTI trade regularly over US$70/b as global growth and tight supplies set the stage for even higher prices in future years. This was above the consensus held prior to the Israel/Iran war of low US$60’s/b or even US$50’s.

Down market days for energy stocks are the best days to build your positions for the lengthy energy super cycle we see lasting into the end of the decade. Subscribe now so you don't miss it! https://schachterenergyreport.ca/subscriptions/

We see energy having a very rewarding period for investors into year end from upcoming lows. Some of the BUY ideas we show on our SER Recommendation List could see upside of 50% or more into year end if our call of over US$75/b post war occurs.