Oil prices surged sharply on Monday, rising nearly 20% to reach their highest levels since July 2022 amid escalating conflict in West Asia that disrupted supply. The Iran war, involving the United States, Israel, and Iran, prompted major oil producers, including Iraq and Kuwait, to cut output. Concerns over the security of the Strait of Hormuz added to market volatility, raising fears of prolonged disruptions to global energy supplies that could affect consumers and businesses worldwide.
Brent crude futures climbed as much as $18.35, or 19.8%, to $111.04 per barrel, and were last up $15.24, or 16.4%, at $107.93 by early Monday. US West Texas Intermediate (WTI) crude rose $16.50, or 18.2%, to $107.40 per barrel after earlier spiking $20.34, or 22.4%, to $111.24. Both benchmarks had already seen significant gains last week.
The conflict has caused output reductions across West Asia. Iraq and Kuwait have begun cutting oil production, adding to earlier liquefied natural gas reductions from Qatar. Blocked shipments through key routes have hampered exports. Analysts predict further reductions from the UAE and Saudi Arabia as storage capacities near full, potentially tightening the market further. Iraqi oil production from its main southern oilfields has fallen 70% to 1.3 million barrels per day due to export restrictions via the Strait of Hormuz, with storage at maximum capacity, according to sources from the state-run Basra Oil Company. Kuwait Petroleum Corporation also declared force majeure on shipments while cutting production.
Additional incidents have intensified risks in the global oil market. A fire in the UAE’s Fujairah oil industry zone caused by falling debris and a drone intercepted by Saudi Arabia’s Defence Ministry near the Shaybah oilfield have raised the market risk premium. Analysts, including Satoru Yoshida of Rakuten Securities, warn that with Iran’s new leadership, US efforts to influence the regime are complicated, and Iran may continue to disrupt the Strait of Hormuz and attack other facilities. Yoshida predicts WTI could spike to $120–$130 per barrel in the near term, reflecting the heightened geopolitical and supply risks.
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