Key Points
- Brent crude soared to $111 in an intra-day high amid fears of prolonged supply disruption
- Drone attacks in the Gulf intensified concerns over energy infrastructure security
- Analysts warned that continued Hormuz disruption could trigger global inflation shock
ISLAMABAD: Oil prices extended gains on Monday, with Brent crude rising above $111 a barrel, as escalating tensions in the Gulf and continued disruption around the Strait of Hormuz raised fears over global energy supplies.
Brent crude futures rose about 1.8 per cent to around $111.20 a barrel during Asian trading’s intra-day high.
Likewise, US West Texas Intermediate crude edged up more than 2 per cent to nearly $108 a barrel.
Both benchmarks touched their highest levels in roughly two weeks.
The latest rally followed a drone strike near the UAE’s Barakah nuclear power facility and additional drone interceptions reported by Saudi Arabia. These untoward incidents intensified market concerns over the vulnerability of Gulf energy infrastructure.
The international media is reporting that a peace process is stalled with no breakthrough in the Iran-US indirect peace talks so far. However, senior officials in Pakistan are confident that the Pakistani leadership’s efforts to facilitate a comprehensive deal would not be in vain.
The investors increasingly worried that instability around the Strait of Hormuz could persist for an extended period.
The Strait of Hormuz normally carries around one-fifth of global oil and liquefied natural gas trade, making it one of the world’s most critical energy chokepoints.
Continued shipping disruption through the passage has tightened supplies and sharply increased volatility across commodity and financial markets.
Analysts warned that renewed attacks on Gulf infrastructure or further escalation between the US and Iran could push oil prices substantially higher.
International media quoted IG market analyst Tony Sycamore saying that recent drone strikes were “a pointed warning” that further military escalation could trigger more attacks on energy facilities across the region.
Several other market strategists have warned that if disruptions in the Strait persist into the second half of the year, Brent crude could move toward $130 to $150 a barrel, increasing recession and inflation risks for major economies.
The rising oil prices also weighed on broader financial markets.
Asian equities declined on Monday, and global bond yields climbed as investors feared that higher energy costs could complicate central bank efforts to control inflation.
Energy traders are now closely monitoring diplomatic contacts between Washington and Tehran, as well as the security situation across Gulf shipping lanes, for signs of either further escalation or possible easing in supply disruptions.
