- Oil prices climbed sharply after US and Israeli strikes on Iran and retaliatory attacks disrupted shipping routes in the Gulf.
- Traders fear that any prolonged restriction through the Strait of Hormuz could tighten global supply and push fuel prices higher worldwide.
Oil prices surged on Monday, March 2, after the United States and Israel launched strikes on Iran and Tehran retaliated across the Gulf. The escalation disrupted supply routes and unsettled global financial markets.
Traders quickly priced in the risk of supply interruptions from Iran and other Middle Eastern producers. Attacks in the region, including incidents involving two vessels in the Strait of Hormuz, restricted export flows. Consequently, energy markets reacted sharply.
West Texas Intermediate crude traded near $72 per barrel early Monday. That marked a 7.3 per cent rise from about $67 on Friday, according to CME Group data. Meanwhile, Brent crude climbed to $78.55 per barrel, up 7.8 per cent from $72.87, according to FactSet.
Analysts warned that prolonged hostilities could drive prices even higher. Rising energy costs would increase pump prices and lift transport and food expenses. As a result, consumers could face renewed inflationary pressure.
The Strait of Hormuz remains central to market concerns. About 15 million barrels of crude per day pass through the waterway. That volume represents roughly 20 per cent of global supply, according to Rystad Energy. Tankers transport oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran to global markets. Therefore, any disruption quickly tightens supply expectations.
Earlier this year, Iran restricted parts of the strait during a military drill. Oil prices rose about 6 per cent in the days that followed. Consequently, traders now respond rapidly to any military signals in the corridor.
In response to the tension, eight members of the OPEC+ alliance announced plans to raise production by 206,000 barrels per day in April. The countries increasing output include Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman. Although the meeting had been scheduled earlier, the timing proved significant.
However, analysts questioned whether the added output would ease market fears. Jorge León of Rystad Energy said traders focus on physical flows rather than spare capacity. He explained that if shipments through the Strait of Hormuz slow, the production increase would offer limited relief.
Iran currently exports about 1.6 million barrels per day, mostly to China. If those exports stall, China would likely seek alternative suppliers. That shift could tighten global markets further. Therefore, traders continue to monitor both military activity and shipping flows in the Gulf.
In the coming days, price direction will depend on access to export routes. For now, geopolitical risk remains the dominant driver of energy volatility.