Key Points
- Supply disruption fears intensify
- Strait of Hormuz remains in focus
ISLAMABAD: Global oil prices surged to their highest level in more than a month on Monday as escalating Iran-US military confrontation heightened concerns over potential disruptions to global energy supplies.
Brent crude futures rose more than 3 per cent to trade above $90 per barrel, marking their highest level since June. Likewise, US West Texas Intermediate (WTI) crude gained nearly 2.7 per cent to $84 per barrel.
The gains extended last week’s rally, during which both benchmarks recorded their strongest weekly advances in months, according to Reuters.
Investor anxiety has intensified as the exchange of strikes continued between the United States and Iran.
The situation enhanced risks to shipping in the Strait of Hormuz, a strategic waterway through which roughly one-fifth of the world’s oil trade passes.
Reports indicate a decline in vessel traffic through the corridor, raising fears of tighter global supplies, according to the AFP.
Market analysts said traders are increasingly pricing in the possibility of prolonged disruptions to oil flows. Inventories remain relatively tight, and geopolitical tensions show little sign of easing, they added.
Some experts have warned that crude prices could move closer to the $100-per-barrel mark if supply risks escalate further with no thaw in Middle East hostilities in sight.
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The latest rally follows a series of sharp price swings over recent weeks, with Brent and WTI repeatedly reacting to developments in the regional conflict.
Despite concerns over the impact of higher energy costs on global economic growth, fears of supply shortages continue to dominate market sentiment.
Oil trajectory since war eruption
Since the outbreak of direct hostilities between the United States and Iran on February 28, global oil markets have experienced one of their most volatile periods in recent years.
Brent crude, which was trading in the low-$70-per-barrel range before the conflict intensified, surged as traders rushed to price in the risk of supply disruptions across the Middle East.
The market’s initial reaction was driven by fears that the conflict could spread beyond Iran and draw in other regional producers.
Concerns were particularly acute over the security of the Strait of Hormuz, the narrow maritime passage linking the Arabian Gulf with global markets.
Around 20 million barrels of oil and petroleum products move through the waterway every day, making it one of the world’s most critical energy chokepoints.
Oil prices climbed sharply during the first weeks of the conflict, with Brent briefly approaching the mid-$90 range as reports of missile exchanges, military strikes and threats to shipping raised the prospect of supply interruptions. And the climax of the conflict pushed oil prices to $120 a barrel before correcting back with emerging signs of ceasefire talks.
The market remained highly sensitive to every development in the conflict. Periods of diplomatic engagement and ceasefire violations repeatedly triggered sell-offs, pushing Brent back toward the low-$70s and WTI into the high-$60s.
Traders increasingly shifted their focus between geopolitical risks and concerns over global demand, particularly the slowing economic activity in major consuming nations.
The latest rally has once again underscored the market’s vulnerability to Middle East tensions.
With Brent crude now back above $90 a barrel for the first time in more than a month, oil has effectively completed a full cycle since the conflict began.
Analysts say the trajectory of prices in the coming weeks will largely depend on whether the conflict remains contained or expands to threaten energy infrastructure and shipping routes across the region.
Any disruption to flows through the Strait of Hormuz could trigger another sharp upward move, potentially pushing Brent toward the psychologically significant $100-per-barrel threshold.
