Oil prices jumped more than 3.5% on Monday as fresh military strikes between the US and Iran raised fears that the conflict could disrupt global oil supplies. The conflict has now entered its sixth month. Brent crude prices rose $3.15, or 3.58%, to $91.25 a barrel at 0903 GMT on Monday. US West Texas Intermediate (WTI) crude also climbed $2.96, or 3.55%, to $86.36 a barrel.
The latest rise came after US forces attacked Iran's Larak Island in the Strait of Hormuz on Sunday. The US military struck two Iranian launchers on the island, according to Reuters, citing a US official. The Larak Island attack was the first known US strike on Iran since late July, adding to concerns that military tensions between the two countries could increase again.
US-Iran strikes
Iran responded by attacking two US air bases in Jordan on Monday, Iranian media reported, citing Iran’s Revolutionary Guards. The new fighting has raised fears that oil supplies could be disrupted. This is because the Strait of Hormuz is a major route for oil shipments around the world.
“Renewed military strikes in the Middle East and concerns of further oil supply disruptions have lifted oil prices,” UBS analyst Giovanni Staunovo said, according to Reuters. Markets are now watching whether the conflict will get worse or begin to calm down, Staunovo said. Any further military action could increase concerns about oil supply and push prices higher.
Strait of Hormuz
The Strait of Hormuz remains a major focus for oil markets. Before the war began at the end of February, about one-fifth of global oil supplies passed through the waterway. Negotiations to end the conflict remain stalled. Mediators are still trying to find a way to reopen the Strait of Hormuz and restore normal shipping through the important oil route, Reuters reported.
{{/usCountry}}The Strait of Hormuz remains a major focus for oil markets. Before the war began at the end of February, about one-fifth of global oil supplies passed through the waterway. Negotiations to end the conflict remain stalled. Mediators are still trying to find a way to reopen the Strait of Hormuz and restore normal shipping through the important oil route, Reuters reported.
{{/usCountry}}Also read: Stock market warning: S&P 500 faces correction risk as inflation stays high and Fed rate hikes loom
Oil shipping risk
Shipping activity through the strait has fallen sharply. Shipping data showed that only about five visible commodity vessels a day crossed the waterway over the weekend, suggesting that shipping companies are being cautious because of the risk of attacks.
A tanker was also hit by a projectile while entering the Strait of Hormuz on Saturday, the United Kingdom Maritime Trade Operations agency said on Sunday. The latest oil price jump was also made bigger by low trading volumes. Saxo Bank analyst Ole Hansen said trading was thinner because of a public holiday in the UK, according to Reuters.
Trump Kharg Island claim
Trump also made a claim about Iran's Kharg Island, saying in a social media post on Sunday that the country's major energy hub was being “blown to smithereens.” The post included an AI-generated video but gave no further details. There was no evidence that Kharg Island was under attack at the time. Iran denied that the island had been attacked and said its oil operations were continuing.
The US is also preparing to increase economic pressure on Iran. Treasury Secretary Scott Bessent told Reuters on Sunday that the US was likely to impose new secondary sanctions on Iran every week. The new sanctions could add another layer of pressure on Iran's economy and energy sector, while markets continue to watch how the military conflict affects oil supplies.
US oil reserves
Despite Monday's sharp rally, oil prices are still expected to post monthly losses for August. Brent and WTI had already fallen more than 4% last week, their first weekly declines in three weeks. The US is also looking at increasing its emergency oil reserves. Trump said on Sunday that oil obtained under a recently reached deal with Venezuela would be used to replenish the US Strategic Petroleum Reserve.
The Strategic Petroleum Reserve is currently close to its lowest level in 44 years, making the planned Venezuelan oil purchases important for rebuilding US emergency supplies. For oil markets, the biggest immediate risk remains the Strait of Hormuz. Any further attacks on ships or a longer disruption to the waterway could create fresh concerns about global oil supplies and keep prices under pressure.