Oil Rises Over 25% on Track for Record Surge Amid Escalating Iran Conflict

Rising Oil Prices Signal Global Concern

Oil prices experienced a dramatic increase, surging over 25% on Monday to reach their highest levels since mid-2022. This sharp rise was driven by several factors, including supply cuts from major producers and growing fears of prolonged shipping disruptions due to the expanding conflict between the U.S., Israel, and Iran.

The Strait of Hormuz, a critical chokepoint through which approximately one-fifth of the world’s oil supply typically passes, has become a focal point of concern. Disruptions in tanker movements and rising security risks have already slowed shipping activity, leaving Asian buyers particularly vulnerable because they heavily rely on Middle Eastern crude.

Brent crude futures saw a significant jump, increasing by $24.96 or 27% to $117.65 per barrel at 0451 GMT. The surge was on track for the biggest single-day jump in history, while U.S. West Texas Intermediate (WTI) crude futures rose by $25.72, or 28.3%, to $116.62. Earlier in the day, WTI had surged as much as 31.4% to a session high of $119.48 a barrel, and Brent climbed up to 29% to $119.50 a barrel.

Before this Monday’s surge, Brent had already risen 27% and WTI by 35.6% the previous week. Analysts suggest that unless oil flows through the Strait of Hormuz resume and regional tensions ease, upward pressure on prices is likely to persist.

Supply Cuts and Regional Instability

Iraq and Kuwait have started cutting oil output, adding to earlier liquefied natural gas reductions from Qatar, as the war blocks shipments from the Middle East. Analysts predict that the United Arab Emirates and Saudi Arabia may also need to cut output soon as they run out of oil storage.

Additionally, the appointment of Mojtaba Khamenei to succeed his father Ali Khamenei as Iran’s supreme leader has further heightened concerns. This development signals that hardliners remain firmly in charge in Tehran, a week into its conflict with the United States and Israel.

“With the appointment of the late leader’s son as Iran’s new leader, U.S. President Donald Trump’s goal of regime change in Iran has become more difficult,” said Satoru Yoshida, a commodity analyst with Rakuten Securities. He added that this view accelerated buying, as Iran is expected to continue its closure of the Strait of Hormuz and attacks on other oil-producing nations’ facilities.

Long-Term Impact on Fuel Prices

The ongoing conflict could lead to weeks or even months of higher fuel prices worldwide, even if the conflict ends quickly. Suppliers are dealing with damaged facilities, disrupted logistics, and elevated risks to shipping.

“The next flag will be whether it eventually gets to a point where they have to start shutting in oil wells, which not only impacts output even further, it delays a response once the conflict eases as well. That would potentially sustain those prices for much longer,” said Daniel Hynes, senior commodity strategist at ANZ.

Iraqi oil production from its main southern oilfields has fallen by 70% to just 1.3 million barrels per day as the country is unable to export oil via the Strait of Hormuz due to the Iran war. Crude storage has reached maximum capacity, according to an official with the state-run Basra Oil Company.

Kuwait Petroleum Corporation began cutting oil output on Saturday and declared force majeure on shipments, though it did not specify how much production it would shut.

Escalating Conflicts and Political Responses

Iran’s attacks on oil infrastructure across the region have continued. Fujairah Media Office reported a fire breaking out in the UAE’s Fujairah oil industry zone resulting from debris falling, with no injuries reported. Saudi Arabia’s Defence Ministry stated on X that it intercepted a drone heading to the Shaybah oilfield.

Israel’s military has threatened to kill any replacement for the deceased Ali Khamenei, while Trump said the war might only end once Iran’s military and rulers had been wiped out.

As oil prices surged, U.S. Senate Democratic Leader Chuck Schumer called on Trump to release oil from the Strategic Petroleum Reserve. “President Trump should release oil from the SPR now to stabilize markets, bring prices down, and stop the price shock that American families are already feeling thanks to his reckless war,” Schumer said in a statement.