Oil surged by the most in four years, before paring some gains as traders assessed the effective closure of the Strait of Hormuz triggered by the US-Israeli war against Iran.
Global benchmark Brent was about 5 per cent higher near $76 a barrel, after earlier rallying by as much as 13 per cent to the highest since January 2025.
Tanker traffic through the strait — the chokepoint off Iran’s coast that handles a fifth of the world’s oil and large volumes of gas — has largely halted, with a self-imposed pause in place by shipowners and traders as the conflict spreads.
While Iranian authorities said on Sunday that the key waterway remained open, they also said they had attacked three oil tankers. President Donald Trump, meanwhile, said US forces sank nine Iranian naval ships, and that combat operations would continue until all objectives were completed.
The marked shifts in oil prices in Monday’s session were echoed by moves in other assets, with gold — a traditional haven — spiking and then paring gains. A gauge of global equities initially dived before recovering some losses.
In reaction to the widening conflict, OPEC+ agreed at a pre-arranged weekend meeting to raise quotas next month by 206,000 barrels a day. The group — which includes Iran, as well as Saudi Arabia and Russia — had been expected to resume modest hikes before the outbreak of hostilities on Saturday.
The war marks a dangerous new phase for the global oil market. The US and Israel fired missiles at targets across Iran on Saturday, while urging local people to overthrow the Islamic regime.
Tehran responded with a wave of strikes against Israel, as well as US bases and other targets in states including Saudi Arabia, Qatar, the United Arab Emirates, Kuwait and Bahrain. Iran’s Supreme Leader, Ayatollah Ali Khamenei, was killed.
If the tanker “traffic resumes quickly, or there’s credible de-escalation or some back-room diplomacy talks, then you’ll see some fade,” said Haris Khurshid, chief investment officer at Karobaar Capital LP in Chicago. “Otherwise, we probably consolidate at elevated levels.”
Crude has posted back-to-back monthly gains this year on sustained geopolitical tensions and a series of localized supply snarls. The advance has come despite widespread expectations that the oil market faced a major surplus, following supply hikes by OPEC+, as well as nations outside the group.
“We see Brent oil trading in the $80-to-$90-a-barrel range in our base case over at least the coming week,” Citigroup Inc. analysts including Max Layton said in a note before the start of trading on Monday.
“Our baseline view is that the Iranian leadership changes, or that the regime changes sufficiently as to stop the war within one-to-two weeks, or the US decides to de-escalate having seen a change in leadership and setback Iran’s missiles and nuclear program over the same time frame,” they added.
Morgan Stanley, meanwhile, raised its second-quarter Brent forecast to $80 a barrel from $62.50.
Iran pumps about 3.3 million barrels a day, or 3 per cent of global output, but the nation wields greater influence over energy supplies given its strategic location alongside the strait. Oil from the Persian Gulf must pass through the waterway to get to major markets such as China, India and Japan.
In comments to the New York Times, Trump said the US intended to sustain its assault on Iran for “four to five weeks.” He also said he was open to lifting sanctions if the new leadership showed itself to be a pragmatic partner.
Tanker traffic “appears significantly disrupted as many shippers, oil producers, and insurers have shifted to a cautious wait-and-see mode,” Goldman Sachs Group Inc. analysts including Daan Struyven said in a note. “To our knowledge, there is no confirmed damage to oil production or to oil-export infrastructure.”
If tanker flows in the Strait of Hormuz are not restored quickly, oil prices could exceed $100 a barrel, according to Wood Mackenzie. Even with OPEC raising production in April, the bloc’s additional volumes and spare capacity will be inaccessible if the waterway remains closed, it said.
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