Oil prices surged past $110 a barrel Monday, reaching levels not seen since 2022, as the conflict in Iran continues to disrupt global energy markets and effectively shut down traffic through the Strait of Hormuz. Futures on Brent crude briefly exceeded $119 per barrel in overnight trading before settling around $100 by mid-afternoon, while West Texas Intermediate (WTI) crude fell back to $95 a barrel after a similar spike.
The price volatility followed a weekend of escalating headlines concerning the U.S.-Israel conflict with Iran, sending shockwaves through international markets. Despite the intraday decline, both Brent and WTI remain up roughly 37% and 40%, respectively, since the conflict began, according to reports.
The primary driver of the price increase is the near-total disruption of tanker traffic through the Strait of Hormuz, a critical waterway connecting the Persian Gulf to the global market. Approximately 20 million barrels of oil per day – roughly a fifth of the world’s seaborne crude supply – normally transits the strait. Vortexa data indicates that around 16 million barrels per day are currently stranded behind the strait, unable to reach international markets.
Iran’s Revolutionary Guard Corps (IRGC) stated Monday that the strait was “closed” and threatened to set ablaze any vessel attempting passage, according to Al Jazeera. At least five tankers have been damaged, resulting in two fatalities and approximately 150 ships are currently stranded in the region.
The G7 nations convened Monday to discuss potential releases from strategic petroleum reserves, but ultimately decided against immediate action. This decision comes after the U.S. And Israel initiated air strikes against Iran on February 28th, a period that coincided with the largest weekly gain in oil prices since at least 1985.
The impact extends beyond crude oil. QatarEnergy halted production of liquefied natural gas (LNG) following reported military attacks on its facilities, further exacerbating energy supply concerns. Qatar’s Ministry of Defence reported drone attacks targeting facilities in Ras Laffan Industrial City and Mesaieed.
Stock markets initially reacted negatively to the escalating conflict, with U.S. Markets falling at the open. However, losses were partially recovered by mid-afternoon as oil prices began to stabilize. European markets experienced more sustained declines, with the FTSE 100 in London closing down 1.2%, and the CAC-40 in France and Dax in Germany falling 2.2% and 2.6% respectively. Banks expressed concerns that sustained high energy prices could fuel inflation and potentially delay anticipated interest rate cuts.
Shipping industry analysts report a significant increase in freight costs for routes out of the Middle East and the Gulf, with traffic through the Strait of Hormuz down by at least 80 percent. The situation remains fluid, with no immediate resolution in sight and continued Iranian warnings against navigation through the strait.
