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Oil markets experienced a sharp jump on Monday, hitting their highest levels since January, as escalating tensions in the Middle East fueled fears over supply disruptions.
The United States joined Israel in attacking Iran’s nuclear facilities over the weekend, sparking concerns of further conflict and its impact on global oil flows.
As of early Monday trading, Brent crude futures rose by $1.92 (2.49%) to $78.93 a barrel, while U.S. West Texas Intermediate (WTI) crude gained $1.89 (2.56%) to $75.73. Both benchmarks earlier surged over 3%, with Brent reaching $81.40 and WTI touching $78.40, their highest since January, before giving back some gains.
The price rally followed U.S. President Donald Trump’s announcement that he had “obliterated” Iran’s main nuclear sites, marking a significant escalation alongside Israeli strikes. Iran, the third-largest crude producer in OPEC, has vowed to defend itself, intensifying market jitters.
A key fear among traders is that Iran may retaliate by closing the Strait of Hormuz. This strait is a crucial chokepoint through which about 20% of the world’s crude supply is transported. Iran’s parliament reportedly approved a measure to close the strait, a move previously threatened but never executed.
Supply Risks and Market Implications
June Goh, senior analyst at Sparta Commodities, noted that the risk of damage to oil infrastructure has multiplied amid rising tensions. While alternative pipelines exist, they cannot fully replace the volume transported through Hormuz, meaning some crude exports could be blocked. Increased caution among shippers is expected, potentially limiting supply further.
Goldman Sachs projected that if oil flows through the strait were halved for a month, Brent crude prices could spike to $110 per barrel briefly, with elevated prices persisting for nearly a year after. Despite these risks, the bank assumes no major prolonged disruptions due to global efforts to maintain supply continuity.
Also read: Fact Check: Pakistan’s Airspace Used in US Strike on Iran?
Price Trends and Analyst Perspectives
Since the conflict escalated on June 13, Brent crude has climbed 13%, and WTI has gained around 10%. However, analysts warn that this geopolitical premium on prices may not hold unless there are actual supply disruptions.
Ole Hansen, head of commodity strategy at Saxo Bank, said some investors might sell off long positions from the recent rally. This could limit further gains in oil prices.
The next few weeks are crucial. Traders will watch closely for any disruptions in Middle East oil exports.
