Oil Prices Hold Strong Gains as US–Iran Conflict Revives Hormuz Supply Fears

Oil prices remained sharply higher during European trading on Monday. However, crude gave back part of an earlier rally of almost 5%.

Renewed fighting between the United States and Iran kept concerns about possible supply disruptions through the Strait of Hormuz firmly in focus.

Brent and WTI Rise More Than 3%

At 08:04 ET, Brent crude futures were up 3.3% at $78.49 per barrel.

U.S. West Texas Intermediate futures gained 3.4% to trade near $73.81 per barrel.

Both contracts had climbed by almost 5% earlier in the session before reducing some of those gains.

Later market data showed even stronger advances, with Brent and WTI both rising by more than 8% during the session.

Iranian Attacks Raise Regional Tensions

The latest oil rally followed an expansion of Iranian missile and drone attacks across the Gulf.

Iran targeted locations in countries including Qatar and the United Arab Emirates on Sunday. Tehran said the attacks were a response to recent U.S. military strikes.

The renewed exchange of attacks increased fears that the conflict could spread across a region responsible for a large share of global energy production.

Iran Declares Strait of Hormuz Closed

Tehran also announced that the Strait of Hormuz had been closed after a commercial vessel was struck.

The waterway is one of the world’s most important routes for crude oil and liquefied natural gas exports.

The United States rejected Iran’s claim. President Donald Trump said commercial vessels could continue travelling through the Strait under U.S. protection.

Nevertheless, shipping companies became increasingly cautious.

Vessel Traffic Through Hormuz Slows Sharply

Commercial traffic through the Strait of Hormuz fell significantly over the weekend.

Ship-tracking data showed that only six vessels passed through the waterway on Sunday. That was the lowest daily total in five weeks.

ANZ analysts said shipping companies were limiting inbound movements because of worsening security concerns.

The slowdown showed that the risk of disruption was already affecting transport activity, even without a confirmed full blockade.

Diplomatic Hopes Begin to Fade

Oil prices had previously surrendered some gains after Washington and Tehran appeared reluctant to widen the conflict.

The United States had avoided directly attacking Iranian energy infrastructure. Diplomatic discussions also began late last week.

These developments briefly raised hopes that both sides would prevent further escalation.

However, the latest weekend attacks and Iran’s renewed closure claim have raised fresh doubts about the stability of the previous interim agreement.

Why the Strait of Hormuz Matters for Oil Markets

The Strait of Hormuz is the main export route for crude produced in Saudi Arabia, Iraq, Kuwait, the United Arab Emirates and several other Gulf countries.

A prolonged disruption could force refiners to search for replacement supplies.

Asian refiners would be especially exposed because they rely heavily on Gulf crude.

Any interruption could also increase shipping, freight and insurance costs, adding further pressure to global oil prices.

Goldman Sachs Highlights Short-Term Supply Risks

Goldman Sachs said the recent oil rally demonstrated how important tanker movements through the Strait remain for short-term prices.

Attacks on commercial vessels and renewed U.S.–Iran strikes have increased the risk premium across energy markets.

However, the bank expects the region to become less dependent on the Strait over the coming years.

Goldman Sachs estimates that additional pipeline capacity could protect more than 45% of pre-war Persian Gulf exports from possible Hormuz disruptions by the end of 2027.

That figure could rise above 60% by the end of 2028.

Markets Watch for an Emergency Supply Response

Investors are now monitoring whether major oil-producing countries will coordinate a response.

Markets are also considering the possibility of releases from strategic petroleum reserves if supply conditions deteriorate.

Such measures could help limit price increases if shipping through the Strait remains restricted.

However, their effectiveness would depend on the length and severity of any disruption.

IEA Warns of Risks to the Supply Recovery

The International Energy Agency recently warned that renewed U.S.–Iran hostilities could interrupt the expected recovery in global oil supply.

According to the agency, world production increased by 4.1 million barrels per day in June as crude shipments through Hormuz resumed.

Despite that rebound, output remained well below levels recorded before the conflict.

The IEA expects supply to recover further in 2027. However, that forecast depends heavily on continued improvement in shipping conditions through the Strait of Hormuz.

For now, oil prices are likely to remain highly sensitive to military developments, shipping activity and any signs of a coordinated supply response.