Oil prices surged by as much as 13 per cent on Monday after shipping in the crucial Strait of Hormuz was disrupted by retaliatory Iranian attacks following initial bombing by Israel and the United States that killed Iranian Supreme Leader Ayatollah Ali Khamenei.
Brent crude futures rose to as much as $82.37 a barrel, the highest since January 2025, before retreating to be up $5.41, or 7.4pc, to $78.28 by 06:05.
US West Texas Intermediate crude climbed to an intraday high of $75.33, up over 12pc and the highest since June, though it later pared gains and was up $4.74, or 7.1pc, at $71.76.
Both benchmarks jumped as a sustained exchange of counterattacks damaged tankers. This sharply disrupted shipments in the Strait of Hormuz. It is a waterway between Iran and Oman that connects the Gulf to the Arabian Sea.
Ships carry oil on a typical day. This amounts to about one-fifth of global demand. It comes from Saudi Arabia, the UAE, Iraq, Iran, and Kuwait. These ships sail through the Strait. Tankers haul diesel, jet fuel, gasoline, and other products. They transport these from refineries to major Asian markets, including China and India.
“Markets are acknowledging the seriousness of the conflict. They are also signalling that, for now, this is a geopolitical shock. It is not a systemic crisis,” said Priyanka Sachdeva, senior analyst at Phillip Nova.
Prolonged effective closure of the Strait would push oil prices higher. It would cause shortages in supply to top importers, China and India.
More than 200 vessels have dropped anchor outside the Strait. These include oil and liquefied gas tankers. This information was shown by shipping data on Sunday. Three tankers were damaged, and one seafarer was killed in attacks on Sunday in Gulf waters.
Asian economies are assessing oil stockpile availability and ways to secure alternative supply. South Korea will offer petroleum from its stockpiles to local industries if supply disruptions are prolonged. Meanwhile, India is exploring alternative shipping routes.
Prices pared gains after the steep surge in early Asian trade. Analysts attributed this to buyers already factoring a risk premium into prices. They anticipated the conflict.
Brent had risen over 19pc this year until Friday’s close, while WTI was trading about 17pc higher.
Amid the conflict, Opec+ agreed on Sunday to a modest oil output boost of 206,000 barrels per day for April.
Every Opec+ producer is essentially producing at capacity except for Saudi Arabia, RBC Capital analyst Helima Croft said.
The International Energy Agency is in touch with major producers in the Middle East, director Fatih Birol said on Sunday. The energy watchdog coordinates the release of strategic petroleum reserves from developed countries during emergencies.
Globally, visible oil inventories stood at 7.827 million barrels, enough for 74 days of demand, which is near a historical median, Goldman Sachs wrote in a note.
Citi analysts expect Brent to trade between $80 and $90 a barrel this week amid the ongoing conflict.
“Our baseline view is that the Iranian leadership changes, or that the regime changes sufficiently as to stop the war within 1-2 weeks, or the US decides to de-escalate, having seen a change in leadership and set back Iran’s missiles and nuclear program over the same time frame,” Citi analysts led by Max Layton wrote.
Analysts are also warning that retail gasoline prices in the US, the world’s biggest fuel consumer, may break above $3 a gallon because of the conflict. This is a potentially risky result for President Donald Trump and his Republican Party. The concern grows ahead of the midterm elections this November.
US gasoline futures surged by as much as 9.1pc to $2.496 a gallon, their highest since July 2024, and were last at $2.381 a gallon, up 4.2pc.
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