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Global oil prices surged past $100 (£74, AU$142) a barrel for the first time since 2022 as fallout from the US-Israel war with Iran continues to wipe 20m barrels of oil from the market each day.
A weekend of escalating violence in the Middle East intensified concerns around a sustained supply crunch, propelling oil prices to their highest level in four years and triggering a deep stock market sell-off.
At least five energy sites in and around Tehran were hit by strikes, prompting accounts of “apocalyptic” scenes in the Iranian capital. Kuwait’s national oil company also announced a precautionary production cut amid retaliatory attacks by Iran.
The strait of Hormuz – one of the world’s most important trade arteries, through which about a fifth of global oil and seaborne gas tankers typically pass – has been in effect closed for a week.
Brent crude, the international benchmark, jumped 26.3% to $117.08 per barrel as the new week’s trading began in the Asia Pacific markets, the first time market prices have soared above this key psychological threshold since Russia’s invasion of Ukraine.
The West Texas Intermediate (WTI) benchmark price of US crude also soared, rising 28.7% to $119.96 per barrel.
The extraordinary spike in oil prices is “a very small price to pay” for the US “and World, Safety and Peace”, Donald Trump argued on Sunday, describing it as a “short term” consequence of the US-Israel war on Iran. They “will drop rapidly when the destruction of the Iran nuclear threat is over”, the US president claimed on social media.
The Iranian regime warned that US-Israeli strikes risk pushing prices even higher. “If you can tolerate oil at more than $200 per barrel, continue this game,” a spokesperson for the country’s Revolutionary Guards (IRGC) said after the weekend’s strikes on energy sites.
Japan’s Nikkei 225 dropped 7.4% in Tokyo on Monday, setting up another turbulent week for global equity markets, as South Korea’s Kospi slumped 7.4%. Australia’s ASX 200 dropped 4.1% in Sydney. Pre-market trading data put Wall Street on course to open lower.
Oil prices returned to triple digits after the highest weekly gains since the Covid pandemic six years ago, and included a $10 increase in the price of US crude on Friday alone.
“The grace period given by the market to the Trump administration expired at the end of last week,” according to Clayton Seigle, a senior fellow at the Center for Strategic and International Studies.
“A deficit of 20m barrels per day is hitting global [oil market] balances with no sign of relief. To the contrary, President Trump is demanding unconditional surrender, a very unlikely prospect. While observers may have initially thought his disregard for painful oil prices was a bluff, it’s now clear that it isn’t,” he said.
The Trump administration has tried in recent days to reassure investors that the recent disruption within the oil and gas industries will not last long. “In the worst case, this is a weeks, this is not a months thing,” the US energy secretary, Chris Wright, claimed on CNN on Sunday.
Such statements appear to have fallen on deaf ears.
Overall, oil prices have rocketed by two-thirds from just above $60 a barrel at the start of the year. Prices had already risen in January and February, before accelerating after the US-Israeli attack on Iran just over a week ago, which has disrupted a vital trade route for Middle Eastern oil supplies through the strait of Hormuz.
Fears of a global oil shortfall were compounded late last week by Qatar’s energy minister, who predicted that if the war continued unabated all Gulf energy exporters would be forced to shut down production within weeks and oil would rise to $150 a barrel.
Oil storage facilities in Saudi Arabia, the United Arab Emirates and Kuwait are reaching their limits, meaning major oilfields may need to be shut down if crude cannot be exported via the strait of Hormuz to the global market.
Hundreds of tankers attempting to transit the strait have come to a halt after Iran’s Revolutionary Guards threatened to “set ablaze” any vessel using the trade route, which carries a fifth of the world’s oil and liquefied natural gas.
Seigle warned that exports of oil and gas from the Middle East would not resume “until shipowners, operators, and insurers feel sufficiently safe from the threat environment posed by Iranian warships and aircraft, missiles, drones, speedboats, and naval mines”.
The White House has suggested countermeasures such as rerouting Saudi crude via the Red Sea, drawing on emergency US crude reserves or extending government-backed insurance to shipping companies. However, Seigle added that this would not be enough to offset the loss of 20m barrels of oil a day “or anywhere in that ballpark”.
