Oil Jumps on Iran Tensions

🛒 Oil Prices rise over 4% as a result of escalating tensions between the U.S and Iran.

Author

Ankit Sinha
June 12, 2025

Silver banana goes to





In this issue of the peel:

  • 🌏 The S&P 500 and the NASDAQ dropped 0.27% and 0.50%, respectively, despite a plan to ease trade tensions between the U.S. and China.

  • ☕ CPI rose 2.4%  YoY in the month of May, in line with the expectations of economists.

  • 🛒 Oil Prices rise over 4% as a result of escalating tensions between the U.S. and Iran.

Market Snapshot

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Macro Monkey Says

Where’s the inflation???

Since President Trump started imposing his sweeping Liberation Day tariffs back in April, it seemed like every economist and financial institution was projecting a recession for 2025. Despite those predictions, there has yet to be a tangible inflationary impact on goods and services, and definitely no tangible signs of recession. 

Yesterday morning, CPI was reported to be in line with analysts’ expectations, rising 2.4% YoY. A 2.4% inflation rate is definitely not indicative of a recession, and doesn’t even signal rising inflation. Given this information, why hasn’t inflation risen?

A significant reason for the calm inflation in the U.S could be that producers are hesitant to raise their prices, and are therefore taking a hit on their margins in order to keep prices constant.

Furthermore, the PPI metric, which is set to be released by the BLS today at 8:30 AM EST, will be representative of whether or not businesses are absorbing costs to keep prices constant. 

Additionally, the plan announced by U.S. and Chinese officials to “ease up” on trade tensions is not only positive for the U.S. economy, but also the world economy. Trump announced yesterday that tariffs on Chinese goods will be at 55% and tariffs on American goods will be 10%. Not sure how America pulled that one off. 

Regardless, this deal is overwhelmingly positive when considering the 245% tariffs that were previously placed on Chinese goods. Another part of the deal was that China would supply rare earth minerals to America, an industry that China has monopolized. 

The Trump Administration has also seemingly reversed a previous announcement that they would start “revoking visas” for Chinese students connected to the Chinese Communist Party and students who study in “critical fields.” 

The Takeaway?

All things considered, despite the marginal decrease in the S&P and the NASDAQ, today was a win for the global economy. China and the U.S. came to a reasonable agreement on the trade front, and inflation has yet to have a noticeable impact on the U.S. Nevertheless, it is still likely too early to conclude that tariffs will not have an inflationary impact. 

Career Corner

Question

I'm having trouble with accounting questions related to non-cash expenses and how to account for them on the cash flow statement. Regarding one question, I initially thought I had to reclassify interest expenses on the cash flow statement, but that was incorrect.

Additionally, I incorrectly failed to add back the write-down to assets on the cash flow statement for another question. What exactly determines whether an expense should be added back on the cash flow statement?

Answer

What they’re looking for is your ability to tell that something is non-cash.

Depreciation is non-cash because the cash was spent when you purchased the factory.

Asset write-down is non-cash because, again, the cash was spent when the asset was purchased, not in the current period. Writing it down is similar to depreciation
you’re not using cash to effect that write-down.

In your example, interest IS a cash expense in the current period. No need to add anything back, that cash is going out the door this period (and interest is captured in Net Income).

Head Mentor, WSO Academy

What's Ripe

Oklo Inc. (OKLO) 29.5% 

  • Oklo, a nuclear technology company, had an amazing day on the markets after they announced a deal with the U.S. Defense Logistics Agency to “design, construct, own and operate” a reactor on an air force base in Alaska. 

  • Something else to note is that Oklo’s shares are down 7% after hours after they announced a $400 million common stock offering, which investors didn’t like due to share dilution. 

Quantum Computing Inc. 25.4% 

  • Quantum Computing saw its share price soar after Nvidia CEO, Jensen Huang, said that the industry of quantum computing is reaching “an inflection point.” Additionally, Quantum Computing beat earnings last month, and Wall Street Analysts continue to have a positive sentiment surrounding their stock. 

What's Rotten

Chewy Inc. (CHWY) 11.0%

  • Chewy, an online retailer of pet-related products, didn’t do so well in the markets today after falling short of earnings. Investors of Chewy had elevated expectations of Chewy’s performance, and despite beating sales, investors had a “bone to pick” (sorry) with Chewy. 

GitLab (GTLB) 10.60%

  • Similar to Chewy, GitLab’s shares plummeted after they significantly missed earnings. GitLab reported a net loss of approximately $36 million, whereas analysts had expected a net loss of around $23 million. Additionally, a broader tech selloff in the market may have contributed slightly to the decrease in GitLab’s share price.

Thought Banana

Oil Prices are on the Rise

Yesterday, oil prices increased by 4% primarily due to increasing geopolitical tensions between Iran and the U.S. Additionally, the U.S. embassy in Iraq is being partially evacuated due to not only ongoing security concerns but also the deteriorating relationship between the two superpowers. 

Donald Trump also announced that he is “losing confidence” that the U.S. and Iran will be able to arrive at a deal regarding the Islamic Republic’s nuclear program. A deal between the U.S. and Iran surrounding the nuclear program would definitely prevent an armed conflict in the region, but the chances of peace are dwindling. 

The short answer is that Iran has quite a lot to do with oil prices. This is because Iran has the 3rd most oil reserves of any country in the world, and is a significant exporter of oil. In 2024, Iran exported about 1.5 million barrels of oil per day to the U.S.

Moreover, something else important to note is that oil prices could definitely keep rising if the geopolitical tensions between the U.S. and Iran don’t ease. Additionally, if armed conflict were to begin in Iran and the U.S., let’s just say you might be paying a slight premium on gas. 

If tensions do increase between the U.S. and Iran, it is possible that sanctions might be imposed, and there also could be attacks on oil drilling locations. 

The Takeaway?

The increase in oil prices is simply the market’s reaction to risk; the geopolitical tensions instill uncertainty regarding the supply of oil. Furthermore, if tensions ease between the U.S. and Iran, prices will return to normalcy, but if they escalate, the opposite will unfortunately take place. 

The Big Question: What does an armed conflict in Iran have to do with oil prices?

Banana Brain Teaser

Previous

A certain characteristic in a large population has a distribution that is symmetric about the mean m. If 68% of the distribution lies within one standard deviation d of the mean, what percentage of the distribution is less than m + d?

Answer: 84%

Today

The sides of a square region, measured to the nearest centimeter, are 6 cm long. The least possible value of the actual area of the square region is?

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❝

Compound Interest is the eighth wonder of the world. He who understands it, earns it
 he who doesn’t
 pays it.

Albert Einstein

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Chris, Vyom, Ankit, Mithin, Colin & Patrick