Oil futures jumped more than 2% at the start of the first trading session since the U.S. launched direct attacks against Iran, casting a shadow over the supply outlook in the embattled oil-rich Middle Eastern region.
U.S. crude oil on Sunday evening rose $1.76, or 2.38%, to $75.60 per barrel, while global benchmark Brent was up $1.80, or 2.34%, to $78.81 per barrel. Brent had jumped 5.7% to crack $81 before easing.
President Donald Trump on Saturday surprised markets with the announcement that Washington had directly entered the Iran-Israel conflict, launching attacks against three Iranian nuclear sites in Fordo, Natanz and Isfahan.
Investors are now looking to see how Iran will respond to the unprecedented U.S. strikes. Iran’s foreign minister said Sunday the Islamic Republic reserves “all options” to defend its sovereignty. The initial rise in oil prices could ease if Iran does not respond, according to S&P Global Platts.
Strait of Hormuz
The worst-case scenario for the oil market would be an attempt by Iran to close the Strait of Hormuz, according to energy analysts. Some 20 million barrels per day of crude, or 20% of global consumption, flowed through the strait in 2024, according to the Energy Information Administration.
Iranian state media reported that Iran’s parliament had backed closing of the strait, citing a senior lawmaker. However, the final decision to close the strait lies with Iran’s national security council, according to the report.
U.S. Secretary of State Marco Rubio has warned Iran against attempting to close the strait. It would be “economic suicide” for the Islamic Republic because their exports pass through the waterway, Rubio said.
“We retain options to deal with that,” Rubio told Fox News in an interview Sunday. “It would hurt other countries’ economies a lot worse than ours. It would be, I think, a massive escalation that would merit a response, not just by us, but from others.”
Iran produced 3.3 million bpd in May, according to OPEC’s monthly oil market report released in June, which cites independent analyst sources. It exported 1.84 million bpd last month, with the vast majority sold to China, according to data from Kpler.
Rubio called on China to use its influence to prevent Tehran from closing the strait. About half of China’s waterborne crude oil imports comes from the Persian Gulf, per Kpler.
“I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the Straits of Hormuz for their oil,” Rubio said.
Investors are also watching the odds of a further destabilization of the Iranian regime as a result of U.S.-Israeli hostilities, given the example of the long-spanning impact that the 2011 NATO-led ousting of Muammar Gaddafi had on Libya’s supplies.
Regional tensions
Tensions have likewise ramped up in neighboring Iraq, OPEC’s second-largest producer, where pro-Tehran militias have previously threatened Washington, should it target Iran’s supreme leader, Ayatollah Ali Khamenei.
On Sunday, Iran’s Revolutionary Guard warned that “the US bases in the region are not their strength but rather their greatest vulnerability” without specifying particular sites, according to Google-translated comments carried by Iranian news agency Fars.
Fledgling, but revived diplomatic ties between former rivals Iran and Saudi Arabia could meanwhile diffuse the possibility of disruptions in the supply of the world’s largest crude exporter.
“The Kingdom of Saudi Arabia is following with deep concern the developments in the Islamic Republic of Iran, particularly the targeting of Iranian nuclear facilities by the United States of America,” the Saudi foreign ministry said on Sunday. Riyadh, a close U.S. ally in the Middle East, has limited its involvement in the Iran-Israel offensives.
Back in 2019 — four years before resuming diplomatic relations with Iran — Saudi Arabia’s oil installation facilities at Abqaiq and Khurais sustained damage during attacks that were claimed by the Houthis, but for which Riyadh and the U.S. said Iran bore responsibility. Tehran denied involvement.
At the resumption of Israeli-Iranian fire last week, the International Energy Agency’s chief Fatih Birol said the institution was monitoring the developments and that “markets are well supplied today but we’re ready to act if needed,” with 1.2 billion barrels of emergency stocks on standby.
An aerial view of Chevron crews attempting to extinguish a large fire and explosion that occurred at Chevron Refinery in El Segundo Thursday, Oct. 2, 2025.
Allen J. Schaben | Los Angeles Times | Getty Images
A huge fire broke out on Thursday night at a Chevron jet fuel production unit in California, one of the largest refineries on the U.S. west coast, following reports of an explosion.
No injuries were reported from the incident at the El Segundo plant, Chevron said on Friday, with the U.S. energy major’s fire department personnel and emergency services “actively responding” to the situation.
It was not immediately clear what caused the blaze.
“All refinery personnel and contractors have been accounted for and there are no injuries,” Chevron said in a statement, according to NBC.
“No evacuation orders for area residents have been put in place by emergency response agencies monitoring the incident, and no exceedances have been detected by the facilities fence line monitoring system,” the company added.
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What looks to be Tesla’s long-rumored “more affordable model” has been spotted testing on a highway, without any camouflage. But before you get too excited, it’s just a Model Y with some cheaper parts – and a price that’s not much different than we’ve seen on other Teslas.
For many years, Tesla had planned to build a much more affordable vehicle, starting around $25k. This vehicle was nicknamed the “Model 2,” and would have offered the most affordable entry point into the EV market, at least in the West.
In its place, Tesla started offering vague promises about “more affordable models,” starting in its Q1 report in April 2024. Tesla later specified that these would enter production in the first half of 2025.
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The language Tesla used suggested that the cheaper vehicles would be new models, which means more than one model, and not just based on a current Tesla model. But we reported that this was unlikely to be the case, and that the new models would just be a stripped-down Model Y.
We first saw the “more affordable” Model Y out and about in Chinese spy shots, which included exterior videos and even a peek at the interior. However, in those spy shots, the front and rear of the vehicle were covered with camouflage, suggesting that there would be some changes in those areas Tesla didn’t want to leak yet.
Tesla doesn’t seem to mind those leaks anymore (especially after a low-res website leak), as a Model Y was spotted driving on the highway with no camouflage whatsoever, offering a look into what Tesla was hiding underneath those covers.
The pictures were posted to reddit by Fantastic_Train_7270, and show a Model Y with Florida manufacturer plates.
The nicely clear front end photos show that the car is missing the front light bar that was added with the Juniper refresh, instead reverting to separate headlights – though both are quite narrow, like the headlights on the Juniper.
The rear end is also missing its light bar, instead replaced by a horizontal black line. The line does not have the “T E S L A” badging, as the Juniper refresh has.
The model also has new aerodynamic wheels, which should help add a little range (and may make up for a smaller battery pack, though we don’t have information yet on whether battery size is part of the decontenting associated with the “more affordable” model).
Other than the lack of light bars, the front and rear look quite similar to the Juniper refresh. However, one concerning detail is that the rear trunk lid does not seem to fit snugly into the place it’s supposed to fit, instead encroaching onto the top of the plastic rear fascia.
We don’t know what might have caused this, but we do know that we’ve seen Model Ys with poor color matching on body panels before – but that’s a lot less of a problem than a body panel that seems to be misaligned by the better part of an inch, visible from a longish distance shot on a highway.
Of course, it’s just a prototype, but this is also the reason prototypes have camouflage, so the public can’t see fiddly bits like this ahead of release.
While these photos don’t show us anything of the interior, information from a recent software update gives us some hints as to what has been removed. In addition to removing the glass roof, coat hooks and 8″ rear screen (as could be seen in the Chinese spy shots), the software update suggests that the Model Y will have no ambient LED lights, single-axis seat controls, and simpler air vents.
The fact that this vehicle was spotted without camouflage, alongside the fact that this vehicle has shown up in recent software updates, suggests that release may be imminent. We had expected that it might be released in China first as has been the case with some other Tesla models lately, but the vehicle’s presence on US roads means that it might see a release here soon too.
And if it is releasing soon, it would be at an important time. Tesla just had its first positive sales quarter in some time, but that was primarily due to the expiration of the $7,500 US EV tax credit, which pulled forward demand. That means Teslas are now going to be $7,500 more expensive for US buyers, as of yesterday. So anything Tesla can do to cut prices will be a big deal.
We don’t know for certain how much cheaper the “more affordable” Model Y will be, but estimates (and a leak) suggest a base price of $40k – so, a savings of $5k over the current $45k base price, or $2,500 under the current base price of the Model 3, neither of which are as low as the lowest prices we’ve seen Teslas sell for before. Quite a far shout from the actually affordable $25,000 car we were all promised for so long.
Also, that price would still be a $2,500 price increase compared to the deal which was available just two days ago, before tax credit expiry. And Tesla has its own CEO to thank for that price hike, given he unwisely spent $200 million campaigning for the anti-EV forces that are now making his company’s products less affordable.
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On today’s surprising episode of Quick Charge, Tesla had its first good sales quarter in a while as the EV tax credit expiration spiked demand, but a number of big shareholders still want Elon gone! Press play to find out why!
We’re also highlighting new EV deals from BMW and Jeep – but it’s not all rosy news for Stellantis’ EV fans. The eagerly anticipated, ultra-fast Banshee edition may never see the light of day.
Today’s episode is brought to you by Climate XChange, a nonpartisan, nonprofit organization working to help states pass effective, equitable climate policies. The nonprofit just kicked off its 10th annual EV raffle, where participants have multiple opportunities to win their dream EV.
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