Oil prices rose by more than 25% on Monday, reaching their highest level since mid-2022, as several major producers cut supplies and markets were gripped by fears of prolonged shipping disruptions due to the widening U.S.–Israeli war with Iran.
Energy markets are experiencing extreme tension amid the escalating crisis around the Strait of Hormuz, through which nearly one-fifth of the world’s oil supply normally passes.
Disruptions to tanker traffic and rising security risks have already slowed shipments, leaving Asian buyers particularly vulnerable due to their heavy reliance on crude oil from the Middle East.
Brent crude futures rose by $24.96, or 27%, to $117.65 per barrel by 04:51 GMT, putting them on track for the largest single-day gain on record. U.S. West Texas Intermediate crude futures climbed $25.72, or 28.3%, to $116.62 per barrel.
Earlier on Monday, West Texas Intermediate had surged 31.4%, reaching a session high of $119.48 per barrel, while Brent crude rose 29% to $119.50 per barrel.
Before Monday’s sharp rise, Brent crude had already increased 27% last week, while West Texas Intermediate had climbed 35.6%.
Vasu Menon, Managing Director of Investment Strategy at OCBC Bank in Singapore, said:
“Unless oil flows through the Strait of Hormuz resume soon and regional tensions ease, upward pressure on prices is likely to continue.”
Iraq and Kuwait have begun cutting oil production, adding to earlier reductions in liquefied natural gas supplies from Qatar due to halted shipments from the Middle East amid the war. Analysts expect the United Arab Emirates and Saudi Arabia may soon be forced to reduce production as their oil inventories are depleted.
Another factor pushing prices higher was the appointment of Mojtaba Khamenei as Iran’s Supreme Leader following the killing of his father at the start of the war, signaling that hardliners continue to maintain a firm grip on power in Tehran after a week of conflict.
Satoru Yoshida, a commodities analyst at Rakuten Securities, said:
“With the late leader’s son appointed as Iran’s new leader, U.S. President Donald Trump’s goal of regime change in Iran has become more difficult.”
He added that this perception accelerated buying activity, as Iran is expected to continue blocking the Strait of Hormuz and carrying out attacks on facilities in other oil-producing countries, as happened last week. Yoshida predicted that West Texas Intermediate crude could soon rise to $120 and then $130 per barrel within a relatively short period.
The war could force consumers and businesses worldwide to face higher fuel prices for weeks or even months, even if the conflict — which has lasted only a week so far — ends quickly. Suppliers are already struggling with damaged facilities, disrupted logistics, and increased shipping risks.
Three sources in the oil sector said yesterday that Iraq’s output from its major oil fields has fallen by 70%, dropping to only 1.3 million barrels per day, as the country cannot export oil through the Strait of Hormuz due to the war with Iran. An official at the state-run Basra Oil Company said crude storage has reached maximum capacity.
Kuwait Oil Company also began cutting oil production on Saturday and declared force majeure on shipments, though it did not specify the volume of production to be halted.
As oil prices surged, U.S. Senate Democratic Majority Leader Chuck Schumer called on President Trump to release oil from the Strategic Petroleum Reserve.
In a statement, Schumer said:
“President Trump must release oil from the Strategic Petroleum Reserve now to stabilize markets, lower prices, and stop the price shock that American families are already experiencing because of his reckless war.”
Reuters
