Khan Capital | June 2025
Key Takeaways
- Israel launched Operation Rising Lion on 13 June 2025, striking over 100 nuclear and military targets across Iran in the first major direct state-on-state conflict between the two powers.
- Oil surged up to 13% intraday on the first day of the war, the largest single-session move since Russia’s invasion of Ukraine, before reverting to near pre-conflict levels after the ceasefire.
- The US entered the conflict on Day 10, deploying bunker-buster munitions against Iran’s hardened underground nuclear facilities at Natanz and Fordow.
- The ceasefire on 24 June resolved none of the underlying issues, and Iran’s decision to preserve the Strait of Hormuz as a future weapon proved prescient eight months later.
- The rapid market recovery encouraged the dangerous institutional assumption that Middle Eastern conflicts can always be faded, a lesson that proved catastrophic when Operation Epic Fury began in February 2026.
At approximately 01:00 local time on 13 June 2025, explosions were heard across Tehran as Israeli Prime Minister Benjamin Netanyahu announced that Operation Rising Lion had begun. Within hours, more than 200 Israeli fighter jets had launched five waves of air strikes, dropping over 330 munitions on roughly 100 targets across Iran, including the Natanz nuclear facility, the Fordow underground complex, and the Isfahan Nuclear Technology Centre. Key military commanders and nuclear scientists were killed in the opening salvos.
By the time a US-brokered ceasefire took effect on 24 June, the 12-day conflict had produced the largest single-day oil price surge since the Russian invasion of Ukraine, sent gold to new highs, triggered a sharp equity rotation out of growth and into defence and energy, and fundamentally redrawn the strategic landscape of the Middle East.
| Asset / Metric | Pre-War (Early Jun) | During Conflict | Post-Ceasefire |
|---|---|---|---|
| Brent Crude | ~$65/bbl | Peaked ~$82 (+13% intraday) | Reverted near pre-conflict |
| WTI Crude | ~$67/bbl | $76 peak (+14% intraday) | Returned to ~$63 |
| Gold | ~$3,410/oz | $3,449+ (+1%) | Held gains |
| S&P 500 | Near highs | -1% to -2% initial drop | Full recovery within weeks |
| Defence Stocks | Baseline | LMT +3.7%, NOC surged | Sustained gains |
| Bitcoin | ~$106,000 | Below $105,000 (-1%) | Underperformed as safe haven |
The Escalation Pathway: From Proxy War to Direct Confrontation
The June 2025 strikes did not materialise from nowhere. They represented the culmination of a steady escalation that had been building since October 2023 and accelerated through 2024.
In April 2024, Israel struck the Iranian consulate in Damascus, killing IRGC commanders. Iran retaliated with Operation True Promise I, its first-ever direct missile and drone strike on Israel. Israel then assassinated Hamas leader Ismail Haniyeh in Tehran in July 2024 and Hezbollah’s Hassan Nasrallah in September. Iran launched Operation True Promise II in October, a more substantial missile assault, but again Israeli defences limited the damage.
These exchanges revealed a critical asymmetry: Israel’s multi-layered air defence systems could absorb Iranian missile attacks with manageable damage, while Israel had demonstrated the capacity to strike deep inside Iran with precision. The diplomatic context was equally combustible. The JCPOA nuclear deal, from which Trump withdrew in 2018, had left Iran free to accelerate enrichment. By May 2025, the IAEA reported that Iran possessed enough uranium enriched to 60% for the production of nine nuclear warheads.
What Happened: 12 Days of Unprecedented Escalation
The operational scope was extraordinary. Over 360 attacks were conducted across 27 Iranian provinces, with a third targeting Tehran itself. Key nuclear scientists and at least two senior military commanders were killed. Israel’s use of FPV drones operated by Mossad operatives already inside Iran represented a new paradigm in combined intelligence-military operations.
Iran’s response was immediate and substantial. Hundreds of ballistic missiles and drone swarms were launched against Israeli cities. Three Iranian cluster missiles struck seven Israeli cities simultaneously. 28 Israelis were killed during the 12-day conflict, and 40,000 compensation claims were subsequently filed for property damage.
The conflict expanded beyond the bilateral when the United States entered directly on 22 June. American B-2 bombers dropped GBU-57 Massive Ordnance Penetrators on the hardened underground facilities at Natanz and Fordow. Tomahawk cruise missiles struck Isfahan. Pentagon assessments concluded that Iran’s nuclear programme had been set back significantly, though not eliminated.
Iran’s final act was a largely symbolic missile salvo targeting Al Udeid Air Base in Qatar. Hours later, following intense Omani mediation, Trump announced the ceasefire, branding it “an Official END to THE 12 DAY WAR.”
The Market Response: A Geopolitical Risk Premium in Real Time
Oil experienced its most violent single-day move since March 2022. On 13 June, Brent crude surged as much as 13% intraday, with WTI gaining 14% at one point, before both settled approximately 7% higher. The Dallas Fed noted that WTI rose from $67 to $76 in mid-June before retreating to near pre-conflict levels following the ceasefire.
Goldman Sachs estimated at the time that oil could surpass $100 per barrel if there was an “extended disruption” to the Strait. However, Iran chose not to close the waterway during the Twelve-Day War, a critical decision that kept the oil price spike contained. Julius Baer assessed that the price reaction was “surprisingly unemotional” and predicted the spike would last “weeks rather than months.”
Gold climbed more than 1% to $3,449 per ounce. The US dollar strengthened. Bitcoin fell more than 1% to below $105,000. Equity markets followed the familiar geopolitical playbook: the Dow fell nearly 2% and the S&P 500 lost over 1% in the opening sessions, with a pronounced rotation into defence and energy names. The recovery was equally swift, appearing to confirm that geopolitical shocks in the Middle East are temporary disruptions to be faded. That conclusion would prove catastrophic for investors who carried it into 2026.
What the Market Got Wrong
The deterrence assumption was broken. Markets had long priced Iranian nuclear risk as a diplomatic problem with a diplomatic solution. The June 2025 strikes demonstrated that Israel was willing to launch a pre-emptive war against a near-nuclear power, and that the United States would join it.
Iran’s retaliation was restrained by choice, not by incapacity. Tehran deliberately avoided closing the Strait of Hormuz during the Twelve-Day War, preserving its most potent economic weapon for a future escalation. As RUSI noted, the Strait remained one of Iran’s few remaining deterrents.
The ceasefire resolved nothing. Iran still possessed more than 400 kilograms of 60% enriched uranium. Its missile programme, though degraded, could be reconstituted. Its proxy network, while weakened, remained operational.
The “fade geopolitical risk” playbook was a one-time trade. When Operation Epic Fury began in February 2026, many investors ran the same playbook, only to discover that Iran had learned from June 2025 and was now willing to use its full arsenal of asymmetric responses, including Hormuz closure.
Structural Interpretation: The End of the Shadow War
The Twelve-Day War marked a structural inflection point. First, the era of proxy warfare between Israel and Iran was over. For 45 years, the two countries had fought through intermediaries. Future conflicts would be state-on-state, direct, and conducted with advanced military technology.
Second, the war exposed the limits of Iran’s alliances. Despite Tehran’s rhetoric, neither Russia nor China provided meaningful support. Third, the conflict accelerated a fundamental reassessment of energy security across Asia, where 84% of crude oil transiting the Strait of Hormuz is destined.
Implications for Investors
The geopolitical risk premium in oil is cyclical but the structural vulnerability is permanent. Investors who reduced energy hedges after June 2025 were caught unprepared when the risk re-materialised in early 2026.
Defence stocks have entered a structural bull market. Government defence spending commitments are multi-year in nature and extend well beyond any individual conflict.
Gold remains the only true safe haven during kinetic conflict. Bitcoin’s decline during the war reinforced the hierarchy of safe-haven assets.
The “fade the geopolitical shock” trade works until it does not. Each successive conflict narrows the margin of safety for doing so.
Conclusion
The Twelve-Day War was simultaneously a contained military conflict and a harbinger of something far larger. Markets treated it as a temporary disruption; in retrospect, it was a dress rehearsal.
Sources: Encyclopaedia Britannica, Federal Reserve Bank of Dallas, NPR, Al Jazeera, Julius Baer, RUSI
Related Reading
The Israel-Iran war had origins in the events we covered in Israel-Hamas War: October 7 and Market Implications. For the US-Israeli military response that followed, see Operation Epic Fury. For the energy supply shock, see Oil Above $100: Strait of Hormuz Crisis. For the Fed’s response, see Fed Holds Amid Iran War. Earlier strikes on Saudi energy infrastructure foreshadowed this conflict, as covered in the Abqaiq attack.
Related Reading: see the Hormuz blockade entering its second month.
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