Oil prices rebound as Middle East tensions revive supply concerns

As of 02:37 ET (06:37 GMT) on Monday, Brent Oil Futures expiring in August gained 2.8% to $93.63 per barrel, while West Texas Intermediate (WTI) crude futures advanced 3.1% to $90.05 per barrel. These moves followed weekly declines of roughly 10% for both benchmarks, their sharpest weekly drops in several weeks, driven by earlier reports of potential progress toward a U.S.-Iran ceasefire framework.

Escalating U.S.-Iran confrontation

Market sentiment shifted after the U.S. military said it struck Iranian military sites over the weekend, targeting air defenses, drone command facilities, and related infrastructure. The action followed Iran allegedly shooting down a U.S. drone operating over international waters.

Iran’s Revolutionary Guards responded by attacking an air base used by U.S. forces, while Kuwaiti air defenses intercepted missile and drone attacks. These developments underscored the fragile security situation in the Gulf and dampened earlier optimism about diplomatic progress.

Negotiations aimed at securing a permanent U.S.-Iran ceasefire showed little sign of a breakthrough. U.S. President Donald Trump said Iran remained interested in reaching a deal, but key issues related to regional security, sanctions, and maritime access remained unresolved.

Regional conflict and Strait of Hormuz risks

In a separate escalation, Israel ordered troops to push deeper into southern Lebanon, intensifying its campaign against Iran-backed Hezbollah despite prior ceasefire efforts. This move revived fears that conflict could spread further across the region, potentially threatening energy infrastructure or shipping routes.

The lack of clarity over both the U.S.-Iran talks and the broader regional security outlook kept traders wary of additional disruptions to oil flows through the Strait of Hormuz, which handles roughly a fifth of global oil shipments. Oil markets have swung sharply in recent weeks as investors reacted to conflicting headlines on military actions and diplomatic efforts. Prices had fallen on Friday amid reports of progress toward a U.S.-Iran understanding, but analysts noted that shipping through Hormuz remained below normal levels and that supply concerns persisted.

FAQ

What were oil prices on Monday morning?
As of 02:37 ET (06:37 GMT), August Brent futures traded at $93.63 per barrel, up 2.8%, while WTI crude futures were at $90.05 per barrel, up 3.1%.

How did oil perform over the previous week?
Both Brent and WTI recorded weekly declines of roughly 10%, marking their sharpest weekly drops in several weeks.

Why are markets focused on the Strait of Hormuz?
The Strait of Hormuz is a key chokepoint that handles roughly a fifth of global oil shipments, so any potential disruption due to regional tensions can significantly affect supply expectations.

What role does the Israel-Hezbollah conflict play in oil markets?
Israel’s deeper push into southern Lebanon against Iran-backed Hezbollah has raised concerns that regional conflict could widen and pose risks to energy infrastructure and shipping routes, adding to supply uncertainty.