Oil soars higher as market weighs risks after US strikes Iran

Oil jumped after the US struck Iran’s nuclear sites, stoking concerns that energy supplies from the Middle East could be disrupted.

Global benchmark Brent surged as much as 5.7 per cent to $81.40 a barrel, before paring much of that gain in heavy trading. Timespreads widened. US President Donald Trump said air attacks had “obliterated” the trio of targets, and threatened more military action if Iran didn’t make peace. In its initial reply, Tehran warned the strikes would trigger “everlasting consequences.”

The oil market has been gripped by the crisis since Israel attacked Iran more than a week ago, with futures pushing higher, options volumes spiking, and the futures curve shifting to reflect tensions about tighter near-term supplies. While the Middle East accounts for about a third of global crude output, there haven’t yet been any signs of actual disruption to physical oil flows.

“Traders are starting to think there is nothing here: we are up $10 a barrel since the war started, now a little more, and so I think there is an appropriate amount of risk in the market,” said Bob McNally, founder of Rapidan Energy Advisers LLC and a former White House energy official.

“Traders are holding their breath, waiting to see if Israel or Iran expand this conflict beyond military and political targets into traded energy,” he told Bloomberg Television. “So far, no one has pulled that trigger — and if they don’t, I can see the price reversing.”

There are multiple, overlapping risks for crude flows. The biggest centres on the Strait of Hormuz, should Tehran seek to retaliate by attempting to close the chokepoint. About a fifth of the world’s crude output passes through the waterway at the entrance to the Persian Gulf.

Iran’s parliament has called for the closure of the strait, according to state-run TV. Such a move, however, could not proceed without the explicit approval of Supreme Leader Ayatollah Ali Khamenei.

“The market will closely watch Iran’s response,” said Muyu Xu, a senior crude analyst at Kpler Ltd. “If Iran blocks the Strait of Hormuz, even for one day, oil can temporarily hit $120 or even $150.”

Rival Suppliers

In addition, Tehran could opt to target crude infrastructure in rival suppliers in the Middle East, such as fellow OPEC+ producers Saudi Arabia, Iraq or the United Arab Emirates. Both Riyadh and Baghdad expressed concern following the US attack.

Elsewhere, Iran could orchestrate attacks on ships on the other side of the Arabian peninsula in the Red Sea, encouraging Yemen-based Houthi rebels to harass vessels. After the US attacks, the group threatened retaliation.

If the hostilities escalate, Tehran’s own oil-producing capabilities could be targeted, including the key export hub at Kharg Island. Such a move, however, could send crude prices soaring, an outcome that Washington might want to avoid. So far, Kharg Island has been spared, with satellite imagery pointing to a drive by Iran to expedite its exports of oil.

The crisis will also throw a spotlight onto the Organisation of the Petroleum Exporting Countries, and its allies including Russia. In recent months, OPEC+ eased supply curbs at a rapid clip to regain market share, and yet members still have substantial idled capacity that could be reactivated.

Among the wider market fallout, fuels also strengthened on Monday. Diesel futures gained as much as 7.8% to hit the highest price since July 2024, outpacing the move in crude.

Brent’s prompt spread — the difference between its two nearest contracts, and a closely followed metric — initially widened to as much as $1.99 a barrel in backwardation, from $1.53 on Friday. It then retraced most of that move.

“It may take a few days or even weeks to discern the Iranian response to this unprecedented attack on its nuclear facilities and key personnel,” RBC Capital Markets LLC analysts including Helima Croft said in a note. “Above all, we would caution against the knee jerk ‘the worst is behind us’ hot take at this stage.”

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