Oil prices surged on Monday, reaching their highest levels since January, following the United States’ weekend decision to join Israel in attacking Iran’s nuclear facilities. This escalation has ignited significant concerns about global crude supply.
Brent crude futures climbed $1.52, or 1.97%, to $78.53 a barrel by 0503 GMT, while U.S. West Texas Intermediate (WTI) crude advanced $1.51, or 2.04%, to $75.35. Both contracts initially jumped by over 3% earlier in the trading session, hitting five-month highs of $81.40 for Brent and $78.40 for WTI, before paring some of those gains.
The sharp rise in prices directly followed U.S. President Donald Trump’s announcement that he had “obliterated” Iran’s main nuclear sites in weekend strikes, joining an Israeli assault. This move signals a significant escalation of the conflict in the Middle East, with Tehran vowing to defend itself. Iran is a critical player in the global oil market, being OPEC‘s third-largest crude producer.
Market participants are now bracing for further price increases amid growing fears that any Iranian retaliation could include a closure of the Strait of Hormuz. This vital waterway facilitates the flow of roughly one-fifth of the global crude supply.
Sugandha Sachdeva, founder of New Delhi-based research firm SS WealthStreet, warned of the potential impact: “The current geopolitical escalation provides the fundamental catalyst for (Brent) prices to traverse higher and potentially spiral towards $100, with $120 per barrel appearing increasingly plausible.”
While Iran’s Press TV reported that the Iranian parliament had approved a measure to close the strait, it’s worth noting that Iran has threatened this action in the past but has never followed through.
The situation remains highly volatile, with Iran and Israel reportedly exchanging air and missile strikes on Monday, further intensifying global tensions. Sparta Commodities senior analyst June Goh emphasised the increased risk, stating, “The risks of damage to oil infrastructure … have multiplied.”
Goh added that even with alternative pipeline routes available, a fully inaccessible Strait of Hormuz would prevent some crude volume from being exported, leading shippers to “increasingly stay out of the region.”
A Sunday report from Goldman Sachs projected that Brent crude could briefly peak at $110 per barrel if oil flows through the critical waterway were halved for a month, with prices remaining 10% lower for the subsequent 11 months. However, the bank’s analysis still assumed no significant disruption to overall oil and natural gas supply, suggesting strong global incentives to prevent a prolonged and substantial interruption.
Since the conflict began on June 13, Brent has surged by 13%, while WTI has gained approximately 10%.
Sachdeva also pointed out the inherent dilemma for Iran regarding the Strait of Hormuz: “Given the Strait of Hormuz is indispensable for Iran’s own oil exports, which are a vital source of its national revenues, a sustained closure would inflict severe economic damage on Iran itself, making it a double-edged sword.”
Amidst these rising tensions, Japan on Monday called for a de-escalation of the conflict in Iran, and a South Korean vice industry minister voiced concern over the potential impact of the strikes on the country’s trade.
