Oil prices surged over 20% during Monday's Asian session, climbing to their highest level since mid-2022 as the expanding conflict between the United States, Israel and Iran disrupted Middle Eastern energy supplies and threatened to choke off shipments through the critical Strait of Hormuz.
By 3 pm AEDT (4 am GMT), Brent crude futures had jumped $24.91, or 24.9%, to US$115.78 per barrel, while U.S. benchmark West Texas Intermediate crude futures rose $24.55, or 27%, to $115.45 per barrel.
The latest spike comes after a dramatic rally last week when Brent crude surged 27%, and WTI climbed 35.6% as traders reacted to the rapid escalation of hostilities across the Middle East.
The surge in prices reflects growing fears that the conflict could trigger a sustained disruption to global energy supplies, particularly as the Strait of Hormuz remains effectively blocked.
Several major oil producers have already begun reducing output as exports from the region face mounting logistical constraints.
ING analysts noted: "Iraq, the first to start cutting supplies last week, has reportedly reduced output by around 1.5m b/d. Meanwhile, over the weekend, Kuwait reportedly cut output by as much as 300k b/d.
"The longer this goes on, the more supply we will see shut-in. This is a concern for markets. Even if flows through the Strait of Hormuz start to resume, it will take time for upstream production to ramp up.
"The combination of these production shut-ins and no signs of de-escalation in the war means the market is having to aggressively price in a prolonged supply disruption."
Iraq’s oil sector has already suffered significant disruption. Production from the country’s main southern oilfields has reportedly fallen by about 70% to just 1.3 million barrels per day, according to Reuters, as exports through the Strait of Hormuz have been effectively halted due to the conflict.
Meanwhile, Authorities in the United Arab Emirates said debris from an attack caused a fire in the Fujairah oil industry zone, although officials confirmed no injuries were reported.
