Oil prices climbed sharply on Monday, extending a blistering rally driven by the near-total breakdown of diplomatic efforts between Washington and Tehran, as the world’s most strategically vital oil corridor remains closed.
Brent crude futures rose $1.35, or 1.3%, to $106.68 a barrel by early morning trading, pulling back from an initial surge of more than $2 a barrel as markets digested a weekend of troubling geopolitical developments.
U.S. West Texas Intermediate mirrored the move, gaining 95 cents or 1% to settle at $95.35 a barrel. The gains come on the heels of a staggering weekly performance: Brent and WTI posted their biggest weekly gains since the outbreak of hostilities last week, surging nearly 17% and 13%, respectively, figures that would have seemed extraordinary under almost any other circumstances.
If energy traders were holding out for any diplomatic reprieve over the weekend, Monday morning delivered a sobering reality check. What little optimism had flickered around renewed peace efforts was effectively extinguished when President Donald Trump abruptly cancelled a planned diplomatic mission to Islamabad by his senior envoys, Steve Witkoff and Jared Kushner, a trip widely anticipated as a potential back channel breakthrough with Tehran.
The timing was particularly damaging. Iranian Foreign Minister Abbas Araqchi had already arrived in Pakistan, reportedly prepared to engage. The cancellation left the diplomatic table empty, and the markets rattled.
“The window that briefly appeared to be opening has now closed,” one senior energy trader in London told this reporter. “Markets hate uncertainty, but what they hate even more is a clear signal that nobody is talking.”
Compounding the diplomatic fallout is a stream of incendiary rhetoric from the White House that analysts say is feeding a substantial “war premium” into oil prices.
In posts on Truth Social over the weekend, President Trump threatened to order the shooting and killing of any Iranian vessel found laying mines in the Strait of Hormuz, and claimed the United States had full operational control over the waterway, assertions that Iran has forcefully rejected and that shipping insurers are treating with considerable alarm.
“President Trump’s recent post on Truth Social, urging the shooting and killing of any Iranian boat laying mines in the Strait of Hormuz, alongside his claims of having full control over Hormuz, has continued to fuel elevated war premiums,” said Priyanka Sachdeva, analyst at Phillip Nova, a sentiment echoed by traders and risk managers across the energy complex on Monday morning.
At the center of the crisis lies the Strait of Hormuz, a narrow, 21-mile-wide passage between Iran and Oman through which, under normal circumstances, roughly one-fifth of the world’s oil supply flows daily. Those circumstances no longer apply.
Tehran has largely closed the strait in a retaliatory move against Washington’s blockade of Iranian ports, creating a supply disruption of historic proportions. Shipping data from commodity analytics firm Kpler painted a stark picture on Sunday: just one oil products tanker entered the Persian Gulf, a figure that, in peacetime, would be unthinkable for a region that supplies energy to economies from Tokyo to Frankfurt.
The near-total suspension of traffic has left refiners in Asia and Europe scrambling. Inventories that were already lean are tightening further, and the prospect of a swift resolution, given the state of diplomatic relations, looks increasingly remote.
Goldman Sachs moved swiftly over the weekend to revise its oil price forecasts, lifting its fourth-quarter target for Brent crude to $90 a barrel and WTI to $83 — a significant upward revision that reflects the bank’s expectation of sustained output reductions from the Middle East.
But it was the accompanying language from Goldman’s analysts that sent the more chilling signal to markets. Led by Daan Struyven, the bank’s research team warned that the broader economic risks extend well beyond crude prices alone, citing “unusually high refined product prices,” the risk of outright product shortages, and what it described as “the unprecedented scale of the shock.”
In other words, the crisis is not merely about what you pay at the pump. It is about whether certain refined products, jet fuel, diesel, and heating oil, are available at all in some markets and at what price global trade can function when its energy lifeblood is this constrained.
With no diplomatic talks scheduled, military tensions simmering in the Gulf, and the Strait of Hormuz showing no signs of reopening, energy analysts see little near-term relief for oil prices. Some have begun penciling in scenarios in which Brent tests the $110 to $115 range should the situation deteriorate further or should any naval incident in the Strait spark a fresh escalation.
For consumers and businesses worldwide, the message from markets on Monday morning is an uncomfortable one: the energy shock is not over. It may, in fact, be deepening.
WHAT YOU SHOULD KNOW
The world is staring down a serious energy crisis, and diplomacy, the one tool that could ease it, has effectively collapsed. With the Strait of Hormuz nearly shut, U.S.-Iran tensions at a boiling point, and no peace talks on the horizon, oil markets are in full crisis mode.
Prices are surging, supplies are tightening, and Goldman Sachs is warning that the fallout goes far beyond costly fuel — we’re looking at potential shortages of critical refined products like diesel and jet fuel.
Until Washington and Tehran find a way back to the negotiating table, the world should brace for more pain at the pump and deeper disruptions to the global economy.
