West Texas Intermediate (WTI) crude oil futures jumped 6.28% to $71.23 a barrel on Monday, the first trading session following U.S. And Israeli military operations against Iran that began Saturday, raising concerns about global crude supplies. The price increase continued after market close, surging an additional 8% to $72.50 a barrel as a senior Iranian Revolutionary Guard Corps commander, Ebrahim Yabari, warned that any vessel attempting to traverse the Strait of Hormuz would be set ablaze.
The escalation followed Iranian retaliatory strikes after a joint U.S.-Israel operation resulted in the death of Ayatollah Ali Khamenei, Iran’s supreme leader since 1989. The attacks have focused on Iran’s nuclear capabilities, according to U.S. President Donald Trump, who stated Monday that the operation would continue “as long as it takes,” and suggested it could last more than five weeks.
The Strait of Hormuz, a critical chokepoint for global energy supplies, is a particular focus of concern. Approximately 15 million barrels of crude oil transit the strait daily, representing roughly 20% of the world’s total oil supply. Iran’s foreign minister, Abbas Aragachi, told Al-Jazeera that there was no intention to close the Strait, but Yabari’s subsequent threat casts doubt on that assurance.
Simultaneously, the OPEC+ alliance, led by Saudi Arabia and Russia, announced a production increase of 206,000 barrels per day on Sunday, citing “stable outlooks and low oil stocks.” However, analysts at Rystad Energy noted that this increase “probably won’t calm markets in the immediate term,” particularly if transport flows through the region are restricted.
Brent crude also experienced significant gains, trading with gains of 4.5% on Tuesday, after spiking as high as 12% in initial trading Monday, briefly exceeding $80 a barrel – a level not seen since June of last year. Analysts at Barclays believe a prolonged closure of the Strait of Hormuz could drive oil prices towards $100 per barrel, though they also cautioned that prices may not sustain those levels if the situation de-escalates. Iran remains the fourth-largest producer within the OPEC+ cartel, accounting for 12% of the group’s total output, with a production capacity of 3.3 million barrels per day, or 3% of global output.
The initial surge in Brent crude to above $80 a barrel was followed by a cooling off, with prices settling at gains of 4.5% as of Tuesday. However, the situation remains volatile, and the potential for further disruption to oil supplies remains high.
