Brent crude futures rose as much as 29 percent to $119.50 a barrel in early trading on Monday, with US West Texas Intermediate surging 31.4 percent to a session high of $119.48 a barrel. Brent had already climbed 27 percent and WTI by 35.6 percent last week.
By 10:48 a.m. Saudi time, prices had pared back, with Brent up 14.17 percent in the session to stand at $105.80 a barrel. WTI was priced at $100.80, up 10.95 percent.
Energy markets are particularly nervous because the crisis is unfolding around the Strait of Hormuz, through which roughly one-fifth of the world’s oil supply normally passes.
Disruptions in tanker movements and rising security risks have already slowed shipping activity, leaving Asian buyers especially vulnerable given their heavy reliance on Middle Eastern crude.
“Unless oil flows through the Strait of Hormuz resumes soon and regional tensions ease, upward pressure on prices is likely to persist,” said Vasu Menon, managing director for investment strategy at OCBC in Singapore.
Iraq and Kuwait have begun cutting oil output, adding to earlier liquefied natural gas reductions from Qatar, as the war blocked shipments from the Middle East. Analysts expect the UAE and Saudi Arabia will have to also cut output soon as they run out of oil storage.
Also boosting prices is the appointment of Mojtaba Khamenei to succeed his father Ali Khamenei as Iran’s supreme leader, signalling that hardliners remain firmly in charge in Tehran a week into its conflict with the US and Israel.
“With the appointment of the late leader’s son as Iran’s new leader, US President Donald Trump’s goal of regime change in Iran has become more difficult,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
“That view accelerated buying, as Iran is expected to continue its closure of the Strait of Hormuz and attacks on other oil-producing nations’ facilities, as seen last week,” he said, predicting WTI could rise to $120 and then $130 a barrel in a relatively short period.
Tokyo’s benchmark Nikkei 225 index plunged as much as 7% in early Monday trading, while other Asian markets also tumbled.
Weeks or months of higher fuel prices
The war could leave consumers and businesses worldwide facing weeks or months of higher fuel prices even if the week-old conflict ends quickly, as suppliers grapple with damaged facilities, disrupted logistics and elevated risks to shipping.
“The next flag will be whether it eventually gets to a point where they have to start shutting in oil wells, which not only impacts output even further, it delays a response once the conflict eases as well. That would potentially sustain those prices for much longer,” said Daniel Hynes, senior commodity strategist at ANZ.
Iraqi oil production from its main southern oilfields has fallen by 70 percent to just 1.3 million barrels per day as the country is unable to export oil via the Strait of Hormuz due to the Iran war, three industry sources said on Sunday. Crude storage has reached maximum capacity, said an official with the state-run Basra Oil Company.
Kuwait Petroleum Corp. began cutting oil output on Saturday and declared force majeure on shipments, though it did not say how much production it would shut.
Iran’s attacks on oil infrastructure across the region have continued. Fujairah Media Office said fire broke out in the UAE’s Fujairah oil industry zone resulting from debris falling, with no injuries reported. Saudi Arabia’s Defence Ministry said on X it intercepted a drone heading to the Shaybah oilfield.
Israel’s military has threatened to kill any replacement for the deceased Ali Khamenei, while Trump said the war might only end once Iran’s military and rulers had been wiped out.
Meanwhile, as oil prices surged, US Senate Democratic Leader Chuck Schumer called on Trump to release oil from the Strategic Petroleum Reserve.
“President Trump should release oil from the SPR now to stabilize markets, bring prices down, and stop the price shock that American families are already feeling thanks to his reckless war,” Schumer said in a statement.