Oil Prices Surge as U.S.-Iran Conflict Escalates
Oil prices climbed sharply during early Asian trading on Monday after the United States and Iran exchanged another series of strikes over the weekend.
The renewed fighting increased fears of a wider Middle East conflict and further disruption to global oil supplies.
Brent crude futures rose 2.2% to $90.25 per barrel by 01:23 ET, after briefly reaching a five-week high of $90.75.
West Texas Intermediate crude futures gained 2.4% to $83.54 per barrel.
Trading volumes across Asia remained relatively low because Japanese markets were closed for a public holiday.
U.S. and Iran Exchange Fresh Strikes
Oil prices accelerated after both sides launched new military attacks over the weekend.
U.S. Central Command said American forces carried out additional strikes against Iran on Sunday evening.
The attacks followed an Iranian strike on a U.S. military base in Jordan that killed at least two American service members and injured several others.
The U.S. military reportedly expanded the range of targets it attacked inside Iran. Meanwhile, Iran increased its own operations against nearby Gulf countries.
Strait of Hormuz Remains at the Center of the Conflict
Much of the fighting continues to focus on control of the Strait of Hormuz.
U.S. Central Command said its latest attacks were designed to weaken Iranian military capabilities used to target shipping in the strategically important waterway.
The Strait of Hormuz is one of the world’s most important energy routes. Therefore, any prolonged disruption could significantly affect global oil supply and prices.
Peace Talks Appear to Have Collapsed
The latest escalation represents the most serious confrontation between the United States and Iran since shortly before their April ceasefire.
Prospects for renewed peace negotiations now appear increasingly limited.
The collapse of diplomatic efforts has encouraged traders to add a larger geopolitical risk premium to oil prices.
Shipping Through Hormuz Remains Disrupted
Shipping activity through the Strait of Hormuz remains well below normal levels.
Transit volumes have fallen to only a small fraction of their pre-conflict levels. This has kept energy markets concerned about further supply disruptions.
ANZ analysts said hopes for a recovery in shipping activity had effectively stalled, with vessel movements through the strait falling to single-digit levels.
Global Oil Inventories Continue to Decline
Although U.S. oil production has increased, analysts said the additional supply has not significantly changed the wider market balance.
Global crude inventories have continued to fall, keeping both oil and refined-product markets relatively tight.
The combination of falling inventories, disrupted shipping and escalating military tensions could continue to support higher oil prices.
