Brent crude futures climbed to $82.37 a barrel, their highest level since January 2025, before paring gains to $5.41, or 7.4%, to settle at $78.28 by 06:05 GMT. U.S. West Texas Intermediate crude also rose during trading to $75.33, its highest level since June 2025, before reducing gains to $4.74, or 7.1%, at $71.76.
The rise in the two benchmark crude prices is attributed to an exchange of attacks that damaged oil tankers and led to a major disruption to the passage of ships in the Strait of Hormuz between Iran and Oman, the main link between the Arabian Gulf and the Arabian Sea.
Under normal circumstances, tankers carrying about one-fifth of the world’s demand for oil, diesel, jet fuel, gasoline and other products from refineries in Saudi Arabia, the UAE, Iraq, Iran and Kuwait pass through the strait to Asian markets, including China and India.
Priyanka Sachdeva, senior analyst at Phillip Nova, said markets are aware of the seriousness of the conflict, but currently view it as "a geopolitical shock rather than a systemic crisis." She added that any prolonged closure of the Strait of Hormuz could lead to higher prices and supply shortages in key oil markets.
Shipping data from Sunday showed that more than 200 oil and liquefied gas tankers were stranded in the Gulf, while three tankers were damaged and a sailor was killed in attacks in territorial waters.
In a related development, members of the OPEC+ alliance agreed on Sunday to a modest increase in oil production of 206,000 barrels per day starting in April.
Analysts warned that retail gasoline prices in the United States, the world's largest fuel consumer, could exceed three dollars a gallon as a result of the escalation, which could pose a challenge to President Donald Trump and his Republican Party ahead of the midterm elections next November.
Since Saturday morning, Israel and the United States have been waging a military aggression against Iran, resulting in the deaths of hundreds of people, including Supreme Leader Ali Khamenei and security officials.
Tehran has retaliated by launching missiles and drones toward Israel, and has also launched attacks on American bases and interests in Arab countries, some of which have resulted in deaths and injuries and damage to civilian infrastructure, including ports and residential buildings.
Iran is facing this aggression despite having made progress in negotiations with the United States, as attested to by the Omani mediator. This marks the second time Israel has reneged on negotiations; the first instance was the outbreak of the June 2015 war.
Washington and Tel Aviv accuse Tehran of possessing nuclear and missile programs that threaten Israel and regional countries friendly to the United States, while Iran maintains that its nuclear program is peaceful and that it is not seeking to produce nuclear weapons.
For decades, Israel, the only country in the region with a nuclear arsenal, has occupied Palestine and territories in Syria and Lebanon, refusing to withdraw and allow the establishment of an independent Palestinian state.
