Oil extended gains on Monday as the U.S.-Israeli war against Iran moved into its third week, heightening concerns about damage to export facilities and sustaining the closure of the Strait of Hormuz - the largest disruption to global supplies on record.
By 2338 GMT Brent crude futures had risen $2.01, or 1.95%, to $105.15 a barrel, after settling $2.68 higher on Friday. U.S. West Texas Intermediate crude was up $1.61, or 1.63%, at $100.32 a barrel, following a near $3 gain in the prior session. Both benchmarks have climbed by more than 40% this month, reaching their highest levels since 2022 after U.S.-Israeli strikes on Iran led Tehran to halt shipping through the Strait of Hormuz - a critical passage that handles about one-fifth of the world’s oil supply.
U.S. President Donald Trump threatened further strikes on Iran's Kharg Island oil export hub after operations targeted military sites over the weekend, and Tehran has signalled further retaliation. Kharg Island moves roughly 90% of Iran’s oil exports, making it central to any disruption of Iranian crude flows.
Shortly after the attacks on Kharg, Iranian drones struck a major oil terminal in Fujairah in the United Arab Emirates. Four sources said oil loading operations at Fujairah have since resumed, but they added it was unclear whether activity had returned to pre-incident levels. Fujairah, which lies outside the Strait of Hormuz, serves as the outlet for about 1 million barrels per day of the UAE’s Murban crude - a volume equivalent to roughly 1% of global oil demand.
Analysts flagged the range of military options being discussed by the U.S. According to SEB analyst Erik Meyersson, Washington is weighing high-risk ground options including raiding nuclear sites for Iran’s enriched uranium, seizing the Kharg Island oil hub, and occupying southern Iran to protect the Strait of Hormuz. "All of these imply significant escalation and require a tolerance for substantially higher risk," Meyersson said.
Separately, U.S. leaders have urged allies to deploy warships to help secure the strategic gateway. Mr. Trump has signalled plans to announce a coalition to escort ships through the Strait of Hormuz as soon as this week, a development reported by the Wall Street Journal.
Strategic reserves and diplomatic signals
The International Energy Agency said more than 400 million barrels of oil reserves will be released to the market soon in a record draw intended to blunt price spikes caused by the Middle East war. The IEA said stocks held in Asia and Oceania would be released immediately, while reserves from Europe and the Americas would become available at the end of March.
At the same time, diplomatic channels showed mixed signals. The Trump administration has rebuffed efforts by Middle Eastern allies to initiate negotiations, according to three sources familiar with those efforts, while Iran has rejected any ceasefire until U.S. and Israeli strikes stop. That stance has reduced hopes for a rapid de-escalation.
"As the conflict enters its third week, the lack of a clear denouement has left global markets increasingly worried about an uncontrollable escalatory spiral," Meyersson said.
In contrast to the prevailing market caution, U.S. Energy Secretary Chris Wright said on Sunday he expects the U.S. war with Iran to end within "the next few weeks", and that oil supplies would rebound and energy costs fall afterwards.
With strategic reserves being mobilised and military and diplomatic options still in flux, markets remain sensitive to any further developments affecting export facilities or shipping through the region. Observers and participants are watching production hubs and loading operations closely for signs that flows can normalise.