Singapore, Singapore. Oil prices surged more than 25% on Monday to their highest levels since mid-2022 as producers cut supplies and fears of prolonged shipping disruptions grew amid the expanding U.S.-Israeli war with Iran.
Strait of Hormuz raises supply disruption concerns
Energy markets focused on the Strait of Hormuz, through which roughly one-fifth of the world’s oil supply normally passes. Disruptions in tanker movements and rising security risks have slowed shipping activity, leaving Asian buyers especially vulnerable due to their reliance on Middle Eastern crude.
Brent and WTI post sharp single-day gains
Brent crude futures were up $24.96, or 27%, at $117.65 per barrel at 0451 GMT, while U.S. West Texas Intermediate crude futures rose $25.72, or 28.3%, to $116.62. Earlier on Monday, WTI climbed 31.4% to a session high of $119.48, and Brent rose as much as 29% to $119.50. Before Monday’s jump, Brent had already risen 27% and WTI 35.6% last week.
Producer cuts add to tightening supply
Iraq and Kuwait have begun cutting oil output, adding to earlier liquefied natural gas reductions from Qatar, as the war blocked shipments from the Middle East. Analysts expect the United Arab Emirates and Saudi Arabia may also have to cut output soon as they run out of oil storage.
Leadership succession in Iran adds to market uncertainty
Prices also rose after Mojtaba Khamenei was appointed to succeed his father Ali Khamenei as Iran’s supreme leader, signalling that hardliners remain in control in Tehran a week into the conflict with the United States and Israel. Satoru Yoshida, a commodity analyst with Rakuten Securities, said the appointment made U.S. President Donald Trump’s goal of regime change in Iran more difficult and accelerated buying amid expectations Iran would continue its closure of the Strait of Hormuz and attacks on other nations’ oil facilities.
Analysts flag continued upward pressure
“Unless oil flows through the Strait of Hormuz resumes soon and regional tensions ease, upward pressure on prices is likely to persist,” said Vasu Menon, managing director for investment strategy at OCBC in Singapore. Yoshida said WTI could rise to $120 and then $130 a barrel in a relatively short period.
How do you expect prolonged disruption risks around the Strait of Hormuz to affect fuel costs in your region?