Oil Prices Soar on First Trading Day Since War Began

SadaNews - Oil has seen its biggest jump in four years, with traders assessing the implications of the actual closure of the Strait of Hormuz due to the war waged by the United States and Israel against Iran.

The price of Brent crude, which is a global benchmark for oil prices, rose by more than 6% to about $78 per barrel, after having earlier surged by approximately 13% to its highest level since January 2025.

The movement of oil tankers through the strait, which is considered a chokepoint off the coast of Iran, has largely come to a halt, handling one-fifth of global oil and large quantities of gas, with a temporary cessation imposed by ship owners and traders themselves amid escalating conflict.

Impact of the Conflict on Markets

While Iranian authorities stated on Sunday that the main waterway is still open, they also mentioned that they attacked three oil tankers. President Donald Trump claimed that U.S. forces had destroyed and sunk nine Iranian naval vessels and that combat operations would continue until all objectives were achieved.

In response to the widening conflict, the OPEC+ alliance agreed in a pre-scheduled meeting over the weekend to increase supply quotas next month by 206,000 barrels per day. The coalition, which includes Iran, Saudi Arabia, and Russia, was expected to resume minor increases before hostilities broke out on Saturday.

The conflict represents a new dangerous phase for the global oil market. The United States and Israel launched missiles at targets throughout Iran on Saturday, killing Iranian leader Ali Khamenei, while encouraging locals to overthrow the regime. Tehran responded with a wave of strikes against Israel, as well as U.S. bases and other targets in countries including Saudi Arabia, Qatar, the UAE, Kuwait, and Bahrain.

Harris Khurshid, Chief Investment Officer at Karobar Capital in Chicago, said: "If tanker movements resume quickly, or if a credible de-escalation occurs, or if diplomatic talks happen behind the scenes, we will see a retreat." He added, "Otherwise, we are likely to stabilize at high levels."

Rising Prices May Complicate Inflation Fighting

Crude oil has risen this year, achieving consecutive monthly increases due to ongoing geopolitical tensions and a series of domestic supply disruptions. These gains came despite expectations that the oil market faces a substantial surplus following increases in supply from OPEC+, as well as from countries outside the coalition.

If energy costs continue to rise, it threatens to increase inflationary pressures worldwide. This could complicate the task of central banks, including the U.S. Federal Reserve, in managing the pace of price increases while supporting growth and employment simultaneously.

Analysts at Citigroup, including Max Layton, wrote in a note before trading began on Monday: "We see Brent oil trading in the range of $80 to $90 per barrel in the base case, at least for the coming week."

They added: "Our fundamental view is that the Iranian leadership will change, or that the regime will change sufficiently to end the war within a week or two, or that the United States will decide to ease tensions after witnessing a leadership change and a diminished nuclear and missile program within the same timeframe."

Morgan Stanley raised its second-quarter forecast for Brent crude to $80 per barrel from $62.50.

Oil May Exceed $100 per Barrel

Iran produces about 3.3 million barrels per day, or 3% of global output, but the country has a greater influence on energy supplies due to its strategic location near the strait. Oil from the Arabian Gulf must pass through this waterway to reach major markets such as China, India, and Japan.

In remarks to The New York Times, Trump stated that the U.S. intends to continue its attack on Iran for "four to five weeks." He also said he is open to lifting sanctions if the new leadership proves to be a pragmatic partner.

Analysts at Goldman Sachs Group, including Dan Stroufin, wrote in a memo: "It seems that oil tanker movements have been significantly disrupted as many shipping companies, oil producers, and insurance firms have shifted to a cautious wait-and-see mode."

They added: "To the best of our knowledge, there is no confirmed damage to oil production or to oil export infrastructure."

If tanker flows in the Strait of Hormuz do not resume quickly, oil prices may exceed $100 per barrel, according to Wood Mackenzie. They stated that even with OPEC+ raising production in April, additional quantities and surplus capacity within the coalition would be unavailable if the waterway remained closed.

Price Rise Pressures Trump

Before the war with Iran, President Trump had adopted an increasingly aggressive foreign policy. In late January, U.S. forces stormed Venezuela and arrested former President Nicolás Maduro, after which the administration took control of the country's oil industry.

An increase in crude prices would eventually reflect in rising product prices, including retail gasoline, which is a closely monitored indicator in U.S. politics.

As the conflict in the Middle East develops, one of Trump's options may be to release quantities of crude from the U.S. Strategic Petroleum Reserve, an emergency stockpile stored in massive underground caverns. The size of the reserve was approximately 415 million barrels as of February 20, according to government data.

The International Energy Agency, based in Paris and advising major economies, stated that markets were "well supplied" so far, according to Executive Director Fatih Birol. He added in a social media post that the agency is in communication with producers in the region as well as with member governments.

In the latest trades, the price of Brent crude in May futures rose by 6.4% to $77.55 per barrel at 1:31 PM in Singapore, after having increased to as much as $82.37 per barrel earlier, while the price of West Texas Intermediate in April futures rose by 6.1% to $71.11 per barrel.