Crude oil surged Monday after a US strike on an Iranian position in the Strait of Hormuz drew Iranian retaliation against US forces in Jordan, deepening a six-month-old war and reviving fears of a full blockade of a vital energy corridor.
By mid-morning trading in London, Brent crude futures had climbed $1.77, or 2%, to $89.87 a barrel, while U.S. West Texas Intermediate added $1.45, or 1.74%, to reach $84.85. The gains capped a volatile 48 hours for energy markets that had, until the weekend, been cautiously pricing in the possibility of de-escalation.
The latest flashpoint emerged Sunday, when U.S. forces struck two Iranian rocket launchers on Larak Island, a small but strategically located outpost inside the Strait of Hormuz.
It was the first confirmed American military action against Iran since late July, and it landed at a moment when markets had grown tentatively hopeful that hostilities might be cooling.
U.S. Central Command described the operation as a targeted response to an imminent threat, saying its forces had observed Iranian Revolutionary Guard Corps personnel preparing to launch rockets fitted with sea mines into the strait, a tactic Washington has repeatedly cited as justification for preemptive strikes on Iranian positions along the waterway.
Tehran’s account was starkly different. Iran’s Revolutionary Guards said the strike killed and wounded several of its soldiers and, through state media, condemned the attack as reckless overreach by the Trump administration.
In retaliation, Iranian media reported Monday that the Guards had struck two U.S. air bases in Jordan. This escalation pushed the conflict, already in its sixth month, into fresh and uncertain territory.
Compounding the market’s unease was a brief, unverified social media post from President Donald Trump on Sunday claiming that Kharg Island, the terminal responsible for the vast majority of Iran’s crude oil exports, was being “blown to smithereens.”
The post was accompanied by an AI-generated video clip but offered no further detail, and no independent evidence emerged to confirm an attack had actually taken place. Iran flatly denied that Kharg Island had been hit, insisting its oil operations were continuing without interruption.
The episode underscored a recurring feature of this conflict: the difficulty traders and analysts face in separating verified military developments from claims official or otherwise that circulate faster than they can be confirmed.
The human and commercial toll of the standoff was visible in shipping data released Monday, which showed that only five commodity vessels a day sailed through the strait over the weekend, a sharp drop reflecting how wary shipping companies have become of sailing through a corridor that, before the war began at the end of February, carried roughly a fifth of the world’s oil supply.
That caution appears well founded. The United Kingdom Maritime Trade Operations reported that a tanker was struck by a projectile Saturday while sailing inbound through the strait, the latest in a string of attacks on commercial vessels that has made Hormuz one of the most hazardous shipping lanes on Earth.
Efforts to broker a resolution remain stuck. Talks aimed at reopening the strait and ending the broader conflict are, in the words of market participants, at an impasse, with mediators unable to bridge the gap between Washington and Tehran.
“We see more chances of contained confrontation rather than any sustained escalation in the conflict,” said Suvro Sarkar, head of energy research at DBS. “What continues to be impacted with every flare-up are the timelines for Hormuz ‘reopening.'”
Sarkar said expectations that formal U.S.-Iran negotiations might resume by the end of the third quarter now look increasingly unrealistic. Absent a breakthrough, he expects oil to trade in a range of roughly $85 to $95 a barrel until there is greater clarity on the situation in the strait.
Adding to the pressure on Tehran, U.S. Treasury Secretary Scott Bessent told Reuters that Washington is likely to roll out new secondary sanctions against Iran every week, a signal that the White House intends to keep tightening the economic vise even as it weighs further military options.
Despite Monday’s rally, both benchmarks remain on track to post modest declines for August after tumbling more than 4% the previous week, their first weekly drop in three as markets whipsawed between hopes of a ceasefire and the reality of renewed fighting.
Separately, Trump said Sunday that oil secured through a newly struck deal with Venezuela would be used to begin replenishing the U.S. Strategic Petroleum Reserve, which has fallen to levels near its lowest in 44 years, a reserve drawdown that has left Washington with less of a buffer to cushion any prolonged disruption to Gulf supplies.
With the Strait of Hormuz effectively operating at a fraction of its normal capacity and both sides trading strikes rather than concessions, analysts say the coming days will hinge on whether the Larak Island attack proves an isolated incident or the opening move in a fresh cycle of escalation.
For now, traders are treating every skirmish confirmed or not as reason enough to keep a war-risk premium baked into the price of crude.
WHAT YOU SHOULD KNOW
Oil is climbing because the US-Iran conflict just escalated again: a US strike on Iran’s Larak Island triggered Iranian retaliation on US bases in Jordan, and with Hormuz traffic already down to a trickle (just five vessels a day) and diplomacy stalled, expect prices to stay elevated and volatile in the $85–95 range until there’s real clarity on the strait reopening.
