Oil prices rose sharply early Monday as retaliatory Iranian attacks disrupted shipping in the Strait of Hormuz following the killing of Iranian Supreme Leader Ali Khamenei by U.S.-Israeli strikes.
Oil Market Reaction
Brent crude futures initially jumped as much as 13% to $82.37 a barrel, the highest price seen since January 2025, before settling up 9.5% at $79.78 a barrel by 07:48 GMT. U.S. West Texas Intermediate crude climbed to $75.33, a high not seen since June, before paring gains to $72.90 per barrel, an increase of 8.8%.
The price increases followed sustained counterattacks that damaged tankers and disrupted shipments through the Strait of Hormuz, a critical waterway connecting the Gulf to the Arabian Sea. Approximately one-fifth of global oil demand is typically shipped through the Strait from Saudi Arabia, the UAE, Iraq, Iran, and Kuwait, along with diesel, jet fuel, and gasoline.
Potential Supply Disruptions
Analysts suggest a prolonged closure of the Strait of Hormuz could lead to higher oil prices and supply shortages. Sentosa Shipbrokers noted that a sustained disruption could also risk alienating China, a key importer of Gulf crude and a major partner of Iran, potentially limiting the duration of any disruption.
Asian economies, including South Korea and India, are assessing their oil stockpiles and exploring alternative shipping routes in response to the disruptions. South Korea will offer petroleum from its stockpiles if needed, while India is investigating alternative routes.
OPEC+ and Global Inventories
OPEC+ agreed Sunday to a modest oil output boost of 206,000 barrels per day for April. However, RBC Capital analyst Helima Croft noted that all OPEC+ producers are operating at capacity except for Saudi Arabia. The International Energy Agency is in contact with major producers in the Middle East and stands ready to coordinate the release of strategic petroleum reserves.
Global visible oil inventories currently stand at 7.827 million barrels, enough for 74 days of demand, which is near a historical median, according to Goldman Sachs.
Looking Ahead
Citi analysts anticipate Brent crude will trade between $80 and $90 a barrel this week. Their baseline view is that the conflict could resolve within one to two weeks through a change in Iranian leadership, U.S. De-escalation, or a setback to Iran’s missile and nuclear programs.
The conflict also has potential implications for U.S. Gasoline prices, which could rise above $3 a gallon, potentially impacting President Trump and the Republican Party ahead of the midterm elections. U.S. Gasoline futures surged to $2.496 a gallon, the highest since July 2024.
Frequently Asked Questions
What caused the initial rise in oil prices?
Oil prices jumped 9% early Monday after shipping in the Strait of Hormuz was disrupted by retaliatory Iranian attacks following the killing of Iranian Supreme Leader Ali Khamenei.
How much oil typically passes through the Strait of Hormuz?
Ships carrying oil equal to about one-fifth of global demand typically sail through the Strait of Hormuz each day.
What is OPEC+ doing in response to the conflict?
OPEC+ agreed on Sunday to a modest oil output boost of 206,000 barrels per day for April.
How will the current situation impact the global energy market moving forward?
