TLDR
- Both Brent crude and WTI reached $119.50 per barrel during Monday trading before retreating, marking their peak since mid-2022.
- Israeli forces targeted Iranian oil infrastructure during weekend operations, prompting Iranian retaliation against Gulf state oil facilities.
- The Strait of Hormuz faces effective blockade by Iran, threatening approximately 20% of global oil transport.
- G7 financial leaders convened Monday to coordinate potential emergency petroleum reserve deployments.
- Gasoline futures in the United States jumped more than 10%, approaching four-year peaks above the $3.00 per gallon threshold.
Crude oil markets experienced dramatic volatility Monday following unprecedented Israeli military operations targeting Iranian petroleum infrastructure. The assault marked the first direct strikes on Iran’s oil sector since hostilities commenced in early March, driving both Brent crude and West Texas Intermediate to intraday peaks of $119.50 per barrel—price levels unseen since the middle of 2022.
As midday trading progressed, Brent crude settled at $106.80 per barrel while WTI traded at $102.79, retreating from overnight highs. The decline followed Financial Times reporting that Group of Seven finance ministers scheduled an emergency Monday session to evaluate coordinated emergency petroleum reserve releases.
The emergency consultation is anticipated to include coordination with the International Energy Agency. At least three G7 nations, with the United States among them, have publicly indicated willingness to support a collective reserve deployment.
Oil markets had already climbed over 25% since the Iranian conflict’s inception in early March. Weekend military escalations drove additional price increases as markets reopened Sunday evening.
Israeli forces struck petroleum storage infrastructure in Tehran on Saturday. Iranian forces responded with drone attacks targeting a Bahraini oil refinery, as reported by the Wall Street Journal.
Strait of Hormuz Faces Near-Complete Disruption
Iranian forces also initiated attacks on vessels navigating the Strait of Hormuz. This critical waterway facilitates roughly 20% of worldwide oil consumption, with current traffic reported at minimal levels.
OCBC analysts noted that “tail risks from a sustained Hormuz stoppage remain in play,” drawing parallels to the magnitude of the 2022 Russia-Ukraine energy disruption.
Deutsche Bank’s strategist Jim Reid acknowledged the potential impact of G7 reserve releases but emphasized “the duration and intensity of the conflict will still be far and away the most important driver.”
Both Kuwait and the United Arab Emirates announced production cuts over the weekend, following similar reductions from Iraq the previous week. Storage capacity limitations connected to supply chain disruptions are compelling certain producers to reduce output.
Saudi Arabia took the unusual step of offering crude petroleum on spot markets, signaling efforts to address supply shortfalls created by the regional conflict.
Trump Signals Prolonged Price Elevation
President Donald Trump addressed the petroleum price surge Sunday, indicating prices would likely maintain elevated levels near-term but predicted they would “drop rapidly” following resolution of the Iranian conflict.
Trump had previously minimized concerns about rising domestic gasoline costs, informing Reuters that military operations against Iran represented his primary focus.
U.S. gasoline futures climbed over 10% Monday, surpassing $3.00 per gallon and approaching their highest levels since mid-2022.
Jefferies economist Mohit Kumar characterized the Iranian oil infrastructure bombardment as evidence of “a shift in war strategy,” cautioning that targeting essential infrastructure escalates both humanitarian and economic consequences.
OCBC analysts projected that under a moderately severe scenario involving partial flow restoration with military escort protection, Brent crude could maintain prices near $100 per barrel through the year’s midpoint.
