Oil surges as Israel launches new Tehran strikes
WTI hits $98.75, Brent climbs to $112.84 amid Hormuz disruption raising fears of supply shock
Oil prices surged to multi-year highs on Monday after Israel launched a new wave of strikes on Tehran, reversing earlier signals of de-escalation and intensifying concerns about energy supply disruptions.
West Texas Intermediate crude jumped to $98.75 per barrel, while Brent crude climbed to $112.84, briefly touching $119 as markets priced in the escalation of the conflict that began in late February. The rapid price increase has been faster than during any other recent conflict, with traders bracing for further volatility.
The immediate market impact stems from disruption at the Strait of Hormuz, the critical maritime chokepoint through which approximately 20% of global oil consumption and 25-27% of all seaborne oil trade typically transits. Around 11 million barrels per day of oil supply have been impacted by the conflict, with Iran effectively halting shipping traffic through the strait after issuing warnings prohibiting vessel passage.
The situation represents the largest supply disruption in the modern oil market's history. A substantial portion of the oil flowing through the strait—estimated between 80% and 89%—is destined for Asian markets, raising particular concerns for energy importers in the region.
Analysts warn that current price levels may represent a floor rather than a ceiling. Predictions suggest oil could rise significantly, potentially reaching $130-$150 per barrel if the conflict persists. Oxford Economics estimates that a severe, sustained disruption of the Strait of Hormuz could push oil prices to $140 per barrel.
The Dallas Federal Reserve's models indicate that a complete cessation of oil exports from the Gulf region, which removes close to 20% of global supplies, would elevate the average WTI price to $98 per barrel in the second quarter of 2026, with further increases if the closure extends.
Market volatility is expected to ripple across multiple sectors beyond energy. Defense stocks are likely to see increased interest as tensions persist, while transportation and logistics companies face higher fuel costs. Consumer discretionary and retail sectors may also feel the pinch as higher energy prices threaten to dampen economic activity.
The 2026 Iran War began on February 28 with military strikes by the United States and Iran, followed by retaliatory attacks from Iran targeting Israel, US military bases, and Gulf states. The latest Israeli strikes mark a significant escalation that threatens to prolong the conflict and its economic fallout.
Investors are watching for any diplomatic breakthroughs or signals that the Strait of Hormuz could reopen safely. Until then, elevated oil prices and heightened market volatility appear likely to remain the dominant themes across global financial markets.