Oil prices moved higher on Monday, rising roughly 4% after the U.S. military initiated a blockade of vessels departing Iranian ports, increasing tensions following the breakdown of weekend talks aimed at ending the conflict.
Brent crude gained $4.16, or 4.4%, to settle at $99.36 per barrel, while U.S. West Texas Intermediate (WTI) rose $2.51, or 2.6%, to $99.08. Both benchmarks pulled back from earlier gains, with Brent up more than $8 and WTI more than $9 at session highs, highlighting ongoing volatility.
The market reaction reflects renewed concern over supply disruptions tied to restricted flows through the Strait of Hormuz, a critical transit route for approximately 20% of global oil and LNG shipments. Traffic through the strait remains significantly below normal levels, underscoring the scale of the disruption.
Despite elevated prices in physical markets, futures trading has been more cautious, with sentiment influenced by shifting geopolitical signals and uncertainty around the trajectory of the conflict.
Rising energy costs are increasingly impacting the global economy. Fuel prices have climbed sharply, prompting demand adjustments in key regions, while governments are implementing measures to offset higher energy costs. At the same time, demand expectations have been revised lower in the near term.
Physical crude markets remain exceptionally tight, with spot prices for immediate delivery reaching record levels, well above futures benchmarks. This divergence suggests continued strain in prompt supply availability.
On the policy side, there is potential for additional supply from strategic reserves if conditions worsen, though such measures have not yet been fully deployed.
Overall, the market remains highly sensitive to geopolitical developments, with price direction driven by expectations around supply disruptions, the effectiveness of the blockade, and the potential for renewed diplomatic progress.