During early Asian trading on Monday, international oil prices surged significantly. Fueled by escalating tensions between the United States and Iran, Brent crude prices jumped nearly 4% at one point. Although gains later moderated, prices held firm above $90, marking a new high since mid-June. Meanwhile, West Texas Intermediate (WTI) crude approached the $84 level. The escalation in geopolitical risk primarily stems from the substantial breakdown of ceasefire agreements between the two sides. The US has carried out strikes on targets within Iran for multiple consecutive nights, aiming to degrade its capability to attack commercial vessels. In response, Iran announced restrictions on specific shipping lanes through the Strait of Hormuz and was alleged to have attacked a key oil facility in Kuwait, causing significant damage. Kuwaiti authorities confirmed intercepting drones launched from Iran, while Bahrain and other locations reported similar attacks.
The Strait of Hormuz, a critical artery for global energy transport, has become a new focal point of risk. While large tankers continue to pass through, vessel traffic in the waters has shown a declining trend. Some ships reported fires near Oman, though causes remain unclear. The Iranian Navy claimed to have forced certain vessels ignoring warnings to alter course or halt. This threat to traditional shipping patterns has raised market concerns about potential severe disruptions to energy transport. Spillover effects from the conflict are also significant. Iran-backed Houthi forces in Yemen have previously disrupted Red Sea shipping multiple times and threatened to target Saudi oil facilities if tensions escalate. Meanwhile, Israel reported intercepting Iranian drones near its border.
Market analysts note that escalating attacks indicate the conflict could persist longer. If regional oil infrastructure suffers further damage or Red Sea routes are blocked, oil price increases could accelerate. Global oil inventories have already dropped to historic lows, leaving the energy market with little room for error. The current price surge primarily reflects concerns over future supply disruptions rather than an actual complete supply halt. However, if the US-Iran conflict continues to spread, with more attacks on energy facilities and shipping targets, the global oil market could face a shock comparable to the 1970s energy crisis. Market focus has now shifted to whether risks in the Strait of Hormuz will push oil prices into the $100 era.
