Oil markets rallied in Asian trade on Monday as the conflict involving the U.S., Israel and Iran showed few signs of calming, following strikes over the weekend against a strategic Iranian export node.
Brent crude futures rose as much as 3% to $106.50 a barrel, before easing to trade up 1.6% at $104.77 a barrel by 19:28 ET (23:28 GMT). The jump reflected heightened concern that physical supply from Iran and safe passage through regional waterways could be disrupted for an extended period.
The U.S. carried out strikes over the weekend on Kharg Island, which is the departure point for about 90% of Iran's oil exports. President Donald Trump said the operation targeted military assets on the island and warned that Iran's oil infrastructure could be hit next.
In retaliation, Iran launched a large wave of missile and drone strikes across the Persian Gulf on Sunday, directing attacks at major population centers and U.S. military assets. Tehran has also kept the Strait of Hormuz - a key shipping channel that supplies at least 20% of the world’s oil - effectively blocked, after having begun attacking ships in and around the passage earlier this month.
Over the weekend, President Trump appealed to a number of countries, naming China among them, to assist in reopening the strait. He also warned of potential diplomatic consequences, including delaying an upcoming summit with Chinese President Xi Jinping, and cautioned of a “very bad” future for the North Atlantic Treaty Organization if it did not assist in addressing Iran, according to the Financial Times.
U.S. officials maintained public confidence that the conflict would end quickly, while Iranian officials declared they remained strong and prepared to defend the country. President Trump additionally threatened further strikes against Kharg Island.
A separate report from the Wall Street Journal said the Trump administration plans to announce this week a coalition to escort ships through the Strait of Hormuz, an initiative aimed at safeguarding maritime traffic in the face of the recent attacks.
Oil has registered sharp gains in March as the Iran conflict accelerated. Market participants have cited the possibility of prolonged supply disruptions - particularly if the Strait of Hormuz remains closed - as a central factor supporting higher crude prices.
Summary
Weekend strikes on Kharg Island and subsequent Iranian missile and drone attacks have elevated concerns about oil supply and the security of the Strait of Hormuz. Brent spiked as markets priced in the risk of longer-term disruptions, while the U.S. moves toward coordinated ship escorts through the strait.
Key points
- Brent futures climbed as much as 3% to $106.50 a barrel before trading at $104.77/barrel by 19:28 ET (23:28 GMT).
- The U.S. struck Kharg Island, a hub for 90% of Iran's oil exports; President Trump said military assets were targeted and threatened Iran's oil infrastructure.
- The Strait of Hormuz, carrying at least 20% of global oil flows, has been effectively blocked amid Iranian attacks on vessels; the U.S. plans a coalition to escort ships, according to reporting.
Risks and uncertainties
- Prolonged supply disruptions from the Iran conflict if the Strait of Hormuz remains closed - this affects global energy markets and shipping.
- Further strikes on Kharg Island or other oil infrastructure, which would directly impact export volumes and the oil sector.
- Potential escalation involving attacks on commercial shipping and military assets, increasing volatility in energy and defense-related markets.