Oil prices rose on Monday as the fallout from US and Israeli military strikes on Iran weighed on global energy markets, tanker traffic through the Strait of Hormuz was already severely affected and military strikes continued across the region.
In early Asian trade, Brent futures breached the $80 mark, briefly trading at $82.37 before paring gains slightly as markets digested the volatility. Similarly, WTI futures rallied sharply, crossing the $72 mark in early trade before falling back to $71 at the time of writing.
The rise in oil prices comes amid widespread risk exposure in financial markets. Futures tracking the S&P 500 and Nasdaq 100 edged down nearly 1% on Wall Street as trading resumed, while gold prices rose about 2.6%, reflecting a classic flight to safety.
Shipping through the Strait of Hormuz has dried up after Iran attacked three ships in the first direct sign of disruption to supplies. The chokepoint, which passes 20% of the world’s oil and gas flows, has long been a point of leverage for Iran and will be a central focus of markets as the conflict continues.
While OPEC+ has approved output increases to help maintain market supply, its relatively modest boost to production will do little to combat the disruptive potential of a protracted war.
President Trump said US and Israeli attacks will continue “until all of our objectives are achieved,” anticipating a protracted war. Before this, three American soldiers were killed and five others were injured in this battle. Across the region, deaths were reported in five countries, including 201 in Iran, 9 in Israel, 3 in the UAE, 2 in Iraq and 2 in Kuwait.
In what is expected to be a volatile week for energy markets, markets will be watching closely for new disruptions – particularly in the Strait of Hormuz. If the conflict continues or escalates, higher oil prices are sure to have knock-on effects for commodity markets, inflation metrics, and fiscal outcomes in energy-importing economies.
By Josh Owens for Oilprice.com
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