Oil prices surged on Monday, rising about 10% despite pulling back from earlier session highs, as supply disruptions linked to the escalating U.S.–Israeli war with Iran tightened global energy markets. The rally followed production cuts by Saudi Arabia and other OPEC producers, which have been forced to reduce output amid growing logistical disruptions.
Brent crude futures climbed $9.60, or 10.4%, to $102.29 per barrel by 10:53 a.m. EDT (14:53 GMT). Meanwhile, U.S. West Texas Intermediate (WTI) crude gained $9.21, or 10.1%, to $100.11 per barrel.
Earlier in the trading session, Brent crude briefly surged to $119.50 per barrel, marking its highest level since 2022 and one of the largest single-day price increases on record. WTI crude also jumped to $119.48 per barrel before easing later in the day.
Since the U.S. and Israel launched strikes on Iran on February 28, oil prices have soared dramatically. During this period, Brent crude has risen as much as 65%, while WTI has climbed roughly 78%.
For comparison, global oil prices reached their historical peak in July 2008, when Brent and WTI both traded near $147 per barrel, according to data from LSEG.
Political Developments in Iran Add Market Pressure
Oil markets received additional support after Mojtaba Khamenei was appointed as the successor to Iran’s Supreme Leader Ali Khamenei. The move signals that hardline leadership remains firmly in control in Tehran, reducing expectations of a rapid resolution to the conflict with the United States and Israel.
However, analysts noted that prices retreated from their session highs due to several factors. These included concerns that rapidly rising energy costs could trigger inflation and slow global economic growth, as well as profit-taking in what many traders consider an overbought market.
Historically, higher inflation prompts central banks to raise interest rates, increasing borrowing costs and potentially slowing economic activity, which can ultimately reduce demand for energy.
From a technical perspective, WTI crude reached the most overbought level on record, while Brent crude was the most overbought since 1990.
Saudi Arabia Begins Cutting Oil Production
According to industry sources, Saudi Aramco has started reducing production at two oilfields, reflecting the impact of supply disruptions across the Gulf region.
Analysts also expect other major OPEC producers, including the United Arab Emirates, Iraq, and Kuwait, to follow with similar output cuts as storage facilities fill up and exports remain constrained.
To offset disruptions in the Strait of Hormuz, Saudi Arabia has offered more than 4 million barrels of crude through rare spot tenders, while redirecting some shipments through the Red Sea port of Yanbu.
The ongoing conflict has effectively closed the Strait of Hormuz, a critical global shipping route that normally handles about 20% of the world’s oil and liquefied natural gas supplies. While one Greek-operated tanker recently managed to transit the strait carrying Saudi crude, most vessels remain stranded in the region.
Energy analytics firm Kpler estimates that even if the strait reopened immediately, it could take six to seven weeks for Gulf oil exports to return to normal levels.
Market Backwardation Signals Severe Supply Tightness
Oil futures markets are also showing signs of extreme supply shortages. Front-month Brent contracts are trading roughly $24 per barrel above contracts for delivery in six months, surpassing the previous record premium of about $22 seen during the early weeks of the Russia–Ukraine war in March 2022.
This structure, known as backwardation, typically indicates that traders expect immediate supply shortages and strong demand for near-term oil deliveries.
Even if the conflict were resolved quickly, analysts warn that consumers and businesses could face weeks or months of elevated fuel prices due to damaged infrastructure, disrupted logistics, and ongoing security risks for shipping.
In the United States, gasoline futures surged to around $3.22 per gallon, the highest level since 2022.
UBS analyst Giovanni Staunovo noted that alternative supply options are limited. While countries could release strategic oil reserves, the scale of potential supply disruptions would likely outweigh these emergency measures if the Strait of Hormuz remains closed.
Governments Consider Strategic Oil Reserve Releases
Japan confirmed that the International Energy Agency (IEA) held an emergency online meeting with finance ministers from the Group of Seven (G7) nations to discuss a coordinated release of strategic oil reserves.
However, France said that no final decision has been made, while India indicated it does not currently plan to participate in the IEA initiative.
In the United States, Senate Democratic leader Chuck Schumer has called on President Donald Trump to release oil from the Strategic Petroleum Reserve to help stabilize fuel prices.
Natural Gas and Refinery Disruptions Add to Supply Risks
Energy disruptions are not limited to oil markets. Qatar, one of the world’s largest exporters of liquefied natural gas (LNG), has halted production following attacks on key energy infrastructure.
Refinery outages are also contributing to supply shortages. Bahrain’s BAPCO refinery declared force majeure after a recent attack on its facility, while Saudi Arabia has reportedly shut down its largest oil refinery.
Meanwhile, regional tensions continue to escalate. Turkey reported that NATO air defense systems intercepted a second Iranian ballistic missile that entered Turkish airspace, highlighting the growing risk of broader regional instability.
