Oil prices jump as Hormuz tensions escalate on renewed U.S.-Iran conflict

Oil benchmarks surge on supply disruption fears

As of 01:55 ET (05:55 GMT) on Monday, Brent Oil Futures for September delivery were up 4.8% at $79.65 per barrel, while West Texas Intermediate (WTI) crude futures gained 5% to $74.98 per barrel. Both benchmarks had already advanced more than 4% in the previous week as the U.S.-Iran conflict reignited.

The latest price rally followed Iran’s expansion on Sunday of missile and drone attacks to Gulf states including Qatar and the United Arab Emirates, described as retaliation for U.S. military strikes. Tehran also declared the Strait of Hormuz closed after a commercial vessel was hit, intensifying concern over disruptions to one of the world’s most critical energy shipping routes.

The U.S. disputed Iran’s claim, with President Donald Trump stating that commercial shipping through the waterway remained open under U.S. protection. Nonetheless, shipping activity slowed sharply over the weekend, reinforcing worries that any prolonged disruption could tighten global oil supplies.

Strategic chokepoint under scrutiny and IEA outlook

The Strait of Hormuz is the primary export route for crude from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates and other Gulf producers. A sustained disruption could compel refiners, particularly in Asia, to seek alternative supply sources and could increase freight and insurance costs.

Analysts at ING noted that the key risk is an escalation to levels seen earlier in the conflict, potentially involving neighbouring countries and their energy infrastructure. They also highlighted that uncertainty over whether the latest flare-up will be brief or prolonged is keeping a significant share of market participants on the sidelines.

Market participants are monitoring the possibility of a coordinated response from major oil producers and assessing whether strategic petroleum reserves might be tapped if supply disruptions worsen. In its latest monthly report, the International Energy Agency (IEA) warned that renewed U.S.-Iran hostilities could derail an expected supply recovery if interruptions to shipping through Hormuz persist.

According to the IEA, global oil supply rebounded by 4.1 million barrels per day in June as crude flows through the Strait resumed, although output remained well below pre-conflict levels. The agency forecast further recovery in 2027, conditional on continued improvement in transit through the waterway.

FAQ

Why did oil prices rise nearly 5% on Monday?
Oil prices rose due to renewed U.S.-Iran hostilities, Iran’s announcement of the closure of the Strait of Hormuz, and expanded attacks in the Gulf, which together increased concerns about potential disruptions to global crude supplies.

What are the latest Brent and WTI price levels mentioned?
As of 01:55 ET (05:55 GMT), September Brent futures were at $79.65 per barrel, up 4.8%, and WTI crude futures were at $74.98 per barrel, up 5%.

Why is the Strait of Hormuz so important for oil markets?
The Strait of Hormuz is the main export route for crude from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates and other Gulf producers, making it a critical chokepoint for global energy supply.

What did the IEA say about global oil supply recovery?
The IEA reported that global oil supply increased by 4.1 million barrels per day in June as flows through Hormuz resumed, but remained below pre-conflict levels, and projected further recovery by 2027 if transit through the waterway continues to improve.