Oil prices surged on Monday as the fallout from U.S. and Israeli military strikes on Iran rippled through global energy markets, with tanker traffic through the Strait of Hormuz already heavily impacted and military strikes continuing across the region.
In early Asian trade, Brent futures broke the $80 mark, briefly trading at $82.37 before trimming gains slightly as markets digested volatility. Similarly, WTI futures climbed rapidly, soaring past the $72 mark in early trading before dropping back to $71 at the time of writing.
The spike in oil prices comes alongside broader risk-off sentiment in financial markets. Futures tracking the S&P 500 and Nasdaq 100 pointed to roughly a 1% drop on Wall Street as trading resumed, while gold prices jumped around 2.6%, reflecting a classic flight to safe-haven assets.
Vessel traffic through the Strait of Hormuz has dried up after Iran attacked three ships, marking the first direct sign of supply being disrupted. The chokepoint, through which 20% of the world’s oil and gas flows pass, has long been a point of leverage for Iran and will be a central focus for markets as this conflict continues.
While OPEC+ has approved an output increase to help keep the market supplied, its relatively modest boost to output will do little to counter the disruption potential of an extended war.
President Trump said the U.S. and Israeli strikes “will continue until all of our objectives are achieved,” setting expectations for a prolonged conflict. Already, there have been confirmed reports that three U.S. troops have been killed and five seriously wounded in the fighting. Across the region, there have been deaths reported in five countries, including 201 in Iran, 9 in Israel, 3 in the UAE, 2 in Iraq, and 1 in Kuwait.
In what is sure to be a volatile week for energy markets, markets will be watching new disruptions closely – particularly in the Strait of Hormuz. If the conflict continues or escalates, higher oil prices are sure to have a knock-on effect for refined product markets, inflation metrics, and fiscal outcomes in energy-importing economies.
By Josh Owens for Oilprice.com
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