Oil prices rise as Iran war escalates, lifting Brent and WTI amid Strait of Hormuz risks

Oil prices jumped on Monday as fighting involving Iran worsened, raising fears of a major supply shortfall. Brent crude briefly touched $119.50 a barrel, the highest since mid-2022. US West Texas Intermediate reached $119.48 at one point. Both later slipped below $100, yet stayed well above pre-war levels.

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Crude had traded near $70 a barrel before the US and Israel began the war against Iran on Feb. 28. The conflict entered its second week and spread risks across key energy routes. Iran, Israel and the US struck oil and gas sites, which added pressure. Analysts said there was no clear sign of a quick end.

Strait of Hormuz oil disruption hits shipments and output

Shipping through the Strait of Hormuz nearly halted due to missile and drone fears. The narrow channel carries about a fifth of global oil on a normal day. Rystad Energy estimated roughly 15 million barrels move through daily. Tankers from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran avoided the route.

Export bottlenecks forced major producers to curb supply in the Gulf. Iraq, Kuwait and the UAE cut output as storage sites filled up. With fewer tankers moving, these states struggled to load cargoes. The disruption was not only about transport. It also limited how much oil could be produced and stored safely.

"In economic terms, this is already the largest oil supply shock ever,\" said Nicholas Mulder, an assitant professor of history who studies the economic impacts of wars at Cornell University. Mulder said output losses were about three to four times larger than in 1973 and 1979, as Gulf producers reduced or shut production.

Iran war oil damage spreads to facilities and utilities

Damage reports grew over the weekend, including energy sites and civilian-linked infrastructure. Oil depots in Tehran smouldered after Sunday strikes by Israel. Across the Gulf, Bahrain accused Iran of hitting a desalination plant tied to drinking water. Bahrain’s national oil company declared force majeure after an attack set its refinery complex ablaze.

Political signals also sharpened market anxiety on Monday. Iran named Ayatollah Mojtaba Khamenei as successor to his late father as supreme leader. The move was seen as defiance amid ongoing bombardment by the US and Israel. Traders watched for any wider escalation that could reach more pipelines and terminals.

Oil prices outlook as Iran war reshapes global energy markets

Some analysts warned the recovery could take time even if shipping restarts. Jim Burkhard, vice president and global head of crude oil research at S&P Global Energy, said storage limits and production cuts deepened the crisis. Burkhard said restoring output would be a major technical task. Burkhard said the work could take weeks or longer.

Forecasts diverged on how high prices could climb. Macquarie Research strategists said crude could reach $150 a barrel or higher if the Strait stayed shut for weeks. That would exceed the prior peak near $147 before the 2008 financial crisis. Oxford Economics expected an average of $80 for the quarter, but flagged higher risks.

Governments discussed emergency stockpiles as prices rose, but action stayed limited. On Monday, the Group of Seven said it would not tap strategic reserves yet. \"We’re not there yet,\" French Finance Minister Roland Lescure said after a meeting in Brussels. President Donald Trump also downplayed use of the US Strategic Petroleum Reserve on Saturday.

Higher oil and gas costs pushed up fuel bills across several sectors. Airlines faced more expensive jet fuel, while motorists saw rising pump prices. Household energy costs also moved higher, which raised inflation risks. Investors reacted too, with share prices falling sharply after the war started.

Asian importers appeared especially exposed due to heavy Middle East dependence. Iran exported about 1.6 million barrels a day, mostly to China. China called for an immediate end to fighting. Foreign Ministry spokesman Guo Jiakun said China would act to protect energy security. South Korean President Lee Jae Myung warned against hoarding and urged alternative supplies.

Signs of consumer strain emerged across regions as retail fuel prices climbed. Long queues formed at filling stations in parts of Southeast Asia. In the US, AAA said regular petrol averaged $3.48 a gallon on Monday. That was nearly 50 cents higher than a week earlier. Diesel averaged about $4.66, up more than 80 cents.

Analysts said the US may face less direct harm than other regions, despite high benchmarks. FxPro chief market analyst Alex Kuptsikevich noted the US is now a net oil exporter. Kuptsikevich still warned that fast oil spikes have helped trigger US recessions before. Markets continued tracking whether shipping and output constraints ease soon.

With inputs from PTI