Global oil prices surpassed $100 (£74, AU$142) a barrel for the first time since 2022 as the US-Israeli war with Iran continues to wipe 20 million barrels of oil off the market a day.
A weekend of escalating violence in the Middle East fueled concerns about a continuing supply crisis, sending oil prices to their highest level in four years and triggering a deep sell-off in the stock market.
At least five energy sites in and around Tehran were hit by attacks, prompting “apocalyptic” scenes in the Iranian capital. Kuwait’s national oil company also announced production cuts as a precaution amid Iran’s retaliatory strikes.
The Strait of Hormuz – one of the world’s most important trade arteries, through which about a fifth of the world’s oil and offshore gas tankers pass – has been closed for a week.
Brent crude, the international benchmark, jumped 16.6% to $108.10 a barrel as Asia-Pacific markets opened the new week of trading, marking the first time markets have risen above the key psychological threshold since Russia’s invasion of Ukraine.
The price of West Texas Intermediate (WTI), the benchmark US crude, also rose, rising 19.6 percent to $108.72 a barrel.
Donald Trump argued on Sunday that the extraordinary rise in oil prices was “a very small price to pay for the security and peace of the United States, and the world,” as a “short-term” consequence of the US-Israeli war against Iran. The US president claimed on social media that Iran’s nuclear threat will fall quickly once the devastation is over.
The Iranian government has warned that US-Israeli attacks threaten to push prices higher. “If you can afford oil above $200 a barrel, keep playing the game,” a spokesman for the country’s Revolutionary Guards (IRGC) said after weekend attacks on energy sites.
Japan’s Nikkei 225 fell 6.3 percent in early trade on Monday in Tokyo, setting up another turbulent week for global equity markets, as South Korea’s Kospi fell 5.9 percent. Australia’s ASX 200 fell 3.9 percent in Sydney. Premarket trading data showed Wall Street to open lower.
Oil prices returned to triple digits after their biggest weekly gain since the Covid-19 pandemic six years ago, and included a $10 gain in US crude prices on Friday alone.
According to Clayton Siegel, senior fellow at the Center for Strategic and International Studies, “the grace period the market gave the Trump administration ended late last week.”
“A deficit of 20 million barrels per day is being hit globally. [oil market] Equilibrium with no sign of relief. In contrast, President Trump is calling for an unconditional surrender, which is highly unlikely. While observers may have initially considered his indifference to painful oil prices to be a bluff, it is now clear that it is not,” he said.
Overall, oil prices have risen by two-thirds from above $60 a barrel at the start of the year. Prices had already risen in January and February, before rising sharply just a week ago after the US-Israeli attack on Iran, which cut off a key trade route for Middle Eastern oil supplies through the Strait of Hormuz.
Fears of a global oil shortage were raised late last week by Qatar’s energy minister, who predicted that if the war continued, all Gulf energy exporters would be forced to shut 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 oil fields may have to be shut down if crude cannot be exported to the world market through the Strait of Hormuz.
Hundreds of tankers were trying to pass through the strait after Iran’s Revolutionary Guards threatened to “set fire” to any ships using the trade route, which carries a fifth of the world’s oil and liquefied natural gas.
Siegel warned that oil and gas exports from the Middle East will not resume until shipowners, operators and insurers feel sufficiently protected from the threat environment posed by Iranian warships and aircraft, missiles, drones, speedboats and naval mines.
The White House has proposed countermeasures such as re-routing Saudi crude through the Red Sea, drawing emergency reserves of US crude or extending government-backed insurance to shipping companies. However, Siegel added that this would not be enough “or anywhere in that ballpark” to offset the loss of 20 million barrels of oil per day.
