Oil markets extended their remarkable rally into a second week on Monday, with Brent crude piercing the $90-a-barrel threshold for the first time in more than a month as the widening U.S.-Iran conflict tightened its grip on one of the world’s most critical energy chokepoints.
By 07:51 GMT, Brent futures had climbed $1.03, or 1.17%, to $89.13 a barrel, their highest level since June 11, building on last week’s blistering 15.9% advance, itself the steepest weekly gain for the global benchmark since April.
U.S. West Texas Intermediate crude, meanwhile, added 65 cents, or 0.79%, to reach $83.14, its strongest showing since June 12, after a 15.5% weekly surge that marked its biggest one-week jump since early March.
The rally reflects a market bracing for a prolonged supply squeeze. “The oil market is again tightening in my view, which is likely to keep oil prices supported,” said Giovanni Staunovo, an analyst at UBS, pointing to repeated strikes on vessels crossing the strait that have thinned the flow of tankers exiting the Gulf.
The conflict, which erupted in late February after U.S. and Israeli strikes targeted Iranian military sites, has now ground into its fifth month with no sign of resolution. Over the weekend it escalated further: the U.S. military carried out a ninth consecutive night of strikes on Iranian territory, while Washington’s regional allies Kuwait and Bahrain reported fresh Iranian retaliatory attacks.
Adding to the volatility, Iran’s Islamic Revolutionary Guard Corps said Monday that two oil tankers had been disabled by explosions while attempting to transit what it called an “unsafe” southern route through the strait, vessels it claimed had been steered there on the encouragement of the U.S. military.
Separately, the U.K. Maritime Trade Operations centre reported a vessel ablaze northwest of Oman’s Kumzar early Monday, the latest in a string of incidents that have made the waterway increasingly perilous for commercial shipping.
The human toll of tanker traffic through the strait has become starkly visible in the data. LSEG figures showed just four vessels completed the transit on Sunday, down from eight a day earlier.
Since Friday, only three oil product tankers and a single very large crude carrier have entered the strait to load cargo, a trickle compared with pre-war flows.
“The supply narrative has become more bearish. The anticipated recovery in shipping has effectively stalled, with Strait of Hormuz transit volumes falling to single digits,” analysts at ANZ wrote in a note to clients.
Both combatants have effectively turned the strait into a battleground for economic leverage: the U.S. says it is enforcing a naval blockade of Iranian ports, while Tehran insists it is merely targeting vessels that violate its own rules for navigating the waterway.
The irony of the moment is that Gulf producers had just posted their strongest export performance since before the war began. Shipping data showed crude and condensate exports from Gulf states hit their highest level for the first half of July since late February before the current escalation began eroding those gains as fighting intensified through the strait.
The collapse of a brief U.S.-Iran truce has revived fears over the security of energy flows through a corridor that, before the war, carried roughly 20% of the world’s oil supply.
Adding a further layer of risk, Iran has reportedly pressed the Houthi movement in Yemen to shut down the Red Sea shipping route as well, should the U.S. strike Iranian power infrastructure directly, a move that would squeeze an alternate corridor already disrupted by years of Houthi attacks on commercial vessels.
With inventories drawn down and strategic reserves already tapped heavily earlier in the conflict, traders and analysts alike are watching closely for signs of whether $90 Brent marks a plateau or merely a waypoint toward the triple digits some had feared when the war first began.
WHAT YOU SHOULD KNOW
Oil prices hit a one-month high Monday, with Brent crude topping $90/barrel and WTI near $83, as escalating U.S.-Iran fighting choked Strait of Hormuz shipping.
A ninth night of U.S. strikes, Iranian attacks on Gulf allies, and reported tanker damage cut transit volumes to single digits, reviving fears over the 20% of global oil supply that normally flows through the strait.
