Oil nears $110 as US withdraws diplomats and Middle East war deepens

The U.S. government ordered non-emergency government employees to leave Saudi Arabia as the war engulfing Iran spread across the Middle East, pushing oil prices above $110 a barrel and sparking a market selloff in Asia.

The U.S. Embassy in Riyadh said Monday that non-emergency U.S. government employees and their family members have been ordered to leave the Kingdom, citing increased risks of armed conflict, terrorism and missile and drone attacks from Yemen and Iran. This was the first exit order issued by Washington in Saudi Arabia since the war began.

The move came as Iranian officials named Mojtaba Khamenei, son of the late supreme leader Ayatollah Ali Khamenei, as the country’s new religious and political authority, consolidating control over the Iranian Revolutionary Guard and other hardline groups.

Israel previously warned that any successor to Khamenei would be a potential target, while US President Donald Trump threatened that a new leader in Tehran would be short-lived if the decision was made without his approval.

Trump is also reportedly considering deploying special forces on the ground to seize Tehran’s near-bomb-grade uranium, Bloomberg reported, as officials sought to verify the location of the stockpile of highly enriched material.

Oil markets reacted sharply. Crude oil prices rose above $110 a barrel on Monday morning after several Middle Eastern energy producers announced plans to cut production.

West Texas Intermediate jumped about 30%, or $27, to $117 a barrel. The global benchmark Brent rose more than 25% to $118. The last time oil prices exceeded $110 per barrel was after Russia invaded Ukraine in 2022.

The increase came after days of disruption in the Strait of Hormuz, one of the world’s biggest oil chokepoints. Oil tankers have avoided the narrow waterway after Tehran threatened to attack ships trying to cross the strait.

With shipments stalled, the United Arab Emirates, Kuwait and Iraq said they would cut production as supplies build up.

US Energy Secretary Chris Wright said on Sunday that cross-strait traffic would resume once Washington destroys Tehran’s ability to threaten shipping.

“The grace period that the market had for most of last week, assuming this wouldn’t get out of control and start spreading contagion to other parts of the economy, has clearly come to an end,” said Clayton Seigle, president of energy and geopolitics at CSIS. “We’re probably going to have a crisis period for longer. The market… is kind of struggling to catch up.”

The Israeli army attacked several Iranian oil facilities on Sunday, setting fires and sending thick smoke over Tehran and the neighboring city of Karaj. The attacks appeared to be the first against the country’s energy infrastructure since the war began.

As Iranian drones continued to cause damage and casualties in Gulf states, Saudi Arabia warned that Tehran’s continued attacks could further escalate tensions and damage relations “now and in the future.”

Shortly after oil surpassed $100 in the United States on Sunday night, Trump posted on Truth Social that an increase in “near-term oil prices” was a “very small price to pay” for destroying Iran’s nuclear threat. “Only fools would think differently!”

Asian stock markets plunged early Monday, signaling a broader regional sell-off amid growing concerns about a prolonged and intensified war and a possible impact on oil supplies for the global economy.

According to Yonhap News, South Korea has reportedly considered introducing an oil price cap for the first time in 30 years.

The Australian government is reviewing the request for defensive military support from Gulf nations facing attacks from Iran, while reiterating that it will refrain from engaging in offensive action against Iran.

China sent a special envoy to the Middle East last week to mediate a ceasefire. Its top diplomat, Wang Yi, reiterated Beijing’s call to end military action during a news conference on Sunday, lamenting the conflict as a war that “should never have happened.”