• Iran is still quiet about reasons behind the helicopter accident

• Saudi Arabia’s King health scare turns focus on Crown Prince

• Oil still under pressure; a new catalyst could reverse the recent trend

News of the helicopter accident, which resulted in the loss of several senior Iranian officials including President Raisi, caused a sudden chill in market participants. However, the newsflow since Sunday has been subdued, allowing the oil price to resume its recent bearish trend.

An interim president has already been appointed and elections have been set for June 28. The direction of the country is unlikely to change regardless of the next president as Iran's supreme leader, Ali Khamenei, is still calling the shots. However, the new president could become a very strong candidate for the top spot when Khamenei decides to step down.

Putting the domestic developments aside, it is interesting that the Iranian authorities have been quiet about the reasons behind the helicopter accident and Israel. The feud between Iran and Israel exists for decades but since the October Hamas attack, it took a turn for the worse. Israel’s alleged attack on Iran's consulate in Syria in early April resulted in a surprising, but ineffective, drone and missile attack by Iran.

It will not be surprising if, once the dust settles, Iranian officials raise their rhetoric against Israel, implying its possible involvement in the accident. Such commentary will not shock the market unless the Iranian officials start talking about a possible retaliation, or even the blockade of the Hormuz strait. Such a move would exceed the mostly symbolic Iranian reaction after the Consulate attack, increasing concerns about a direct confrontation between Iran and Israel and threaten the stability of the entire Middle East.

The health scare of the King of Saudi Arabia has attracted some attention. King Salman has been in charge since 2015 when his half-brother passed away due to pneumonia, but he has been effectively running the country since 2012. King Salman is currently being treated for a lung infection, potentially opening the door to an early transfer of power to his son and current Crown Prince, Mohammed bin Salman (MBS).

The Crown Prince, who also holds the position of the Prime Minister since 2017, controls Saudi Arabia's vast oil sector and has been gradually implementing his Vision 2030 plan for reducing the Saudi economy’s reliance on oil. Following the 2017-19 anticorruption campaign, the Crown Prince is presumed to have been centralizing political power as he prepares to officially take over in the near future.

While this leadership style is not fully endorsed by the West, he has managed to maintain a good relationship with both the US and Russia. In addition, there is an ongoing process mediated by the US to normalize the relationship with Israel. Whenever he officially takes over, it will be the first time that the King of Saudi Arabia will not be one of the sons of the nation's founder, King Abdulaziz.

The unexpected strength of the US economy, the continued oil production cuts by most OPEC countries and concerns about Iran properly joining in the Israel-Hamas conflict helped oil climb from the mid-December 2023 lows to the 2024 high of $87.85. Since early April though, oil prices have been on a downward trend as the market is trying to guess the extent of the recent soft patch in the US and the Fed’s likely response.

Developments in both Iran and Saudi Arabia could turn the tide around for oil. Should Iran decide to blame Israel for the helicopter accident and retaliate, possibly with another drone attack and even a blockade of the strait of Hormuz, and if Saudi Arabia experiences an actual change in command, then the oil market could face a new reality. Coupled with some degree of optimism about China's recovery, oil prices could start to head north, creating another headache for the central banks on the brink of announcing rate cuts.