Global oil prices surged sharply on Monday, reaching their highest levels since July 2022, as the escalating conflict between United States, Israel, and Iran prompted major Middle Eastern producers to cut output and raised fears of prolonged shipping disruptions through the Strait of Hormuz.
Iraq and Kuwait have begun reducing oil production, following earlier liquefied natural gas cuts by Qatar, as the conflict blocks shipments from the region. Analysts warn that Saudi Arabia and the United Arab Emirates may soon need to cut output as storage reaches capacity.
Even if the week-old conflict ends quickly, consumers and businesses worldwide could face weeks or months of elevated fuel prices due to damaged facilities, logistical disruptions, and heightened risks to shipping.
Brent crude futures jumped as much as $18.35, or 19.8%, to $111.04 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $16.50, or 18.2%, to $107.40 a barrel after earlier surges of over 22%. Last week, Brent had climbed 27% and WTI 35.6%.
Daniel Hynes, senior commodity strategist at ANZ, noted: “Prices rallied on reports that Middle East producers are reducing output as storage facilities fill quickly. If oil wells eventually need to be shut, output will drop further, keeping prices high even after the conflict eases.”
Industry sources said Iraqi oil production from southern fields has fallen by 70% to 1.3 million barrels per day due to export disruptions via the Strait of Hormuz, with storage reaching maximum capacity. Kuwait Petroleum Corporation has also reduced output and declared force majeure, without specifying volumes.
Iranian attacks on regional oil infrastructure continue. In the UAE, debris from strikes caused a fire in Fujairah’s oil zone, while Saudi Arabia intercepted a drone heading for the Shaybah oilfield.
New Leadership in Iran
On Monday, Mojtaba Khamenei was named Iran’s new Supreme Leader, succeeding his father Ali Khamenei, signalling continued hardline control in Tehran. Analysts warn the appointment makes U.S. goals of regime change more difficult, which has accelerated oil buying.
Satoru Yoshida of Rakuten Securities said: “Iran is expected to continue closing the Strait of Hormuz and attacking oil infrastructure in the region. WTI could rise to $120 and even $130 per barrel in a short period.”
Amid rising prices, U.S. Senate Democratic Leader Chuck Schumer urged Donald Trump to release oil from the Strategic Petroleum Reserve to stabilise markets and ease the impact on American families, calling current price shocks a result of the ongoing conflict.
