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Oil Surges as Iran Conflict Escalates, Raising Fears Over Global Energy Supplies

  • 3 hours ago
  • 2 min read

Crude oil prices jumped in early trading on Monday as markets reacted to intensifying tensions in the Middle East and the potential disruption to global energy supplies.


Oil Surges as Iran Conflict Escalates, Raising Fears Over Global Energy Supplies

 

Investors weighed the economic consequences of coordinated US and Israeli strikes on Iran, followed by swift retaliatory actions from Tehran that targeted assets across several countries in the region.

 

At the start of trading, the price of US benchmark crude briefly spiked by around 8% before easing slightly to trade 5.9% higher at $71.00 per barrel. Brent crude also climbed sharply, rising 6.2% to reach $77.38 per barrel.

 

Market participants are increasingly concerned that oil exports from Iran and other Middle Eastern producers could be slowed or even halted altogether. A series of attacks across the region, including strikes on two vessels navigating the Strait of Hormuz — the narrow gateway to the Persian Gulf — have constrained the ability of countries to ship oil to global markets.

 

“Roughly one-fifth of global oil and LNG (liquefied natural gas) flows squeeze through the Strait of Hormuz. This is not an obscure canal. It is the aorta of the global energy system,” Stephen Innes of SPI Asset Management said in a commentary note.

 

Analysts warn that a sustained conflict could push up prices for gasoline and other fuels, with far-reaching consequences for the global economy as energy costs feed into broader production expenses.

 

Prolonged disruptions to energy shipments from the region would carry significant ramifications. RaboResearch Global Economics & Markets said in a report that extended interruptions to oil flows through the Middle East would have “huge implications for oil and LNG and every market everywhere if it occurs. Energy is an input to all production.”

 

Iran currently exports approximately 1.6 million barrels of oil per day, the majority of which is shipped to China. Should Iranian exports be curtailed, Beijing may be forced to seek alternative sources of supply — a shift that could place additional upward pressure on energy prices.


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However, China maintains substantial oil reserves, estimated at up to 1.5 billion barrels, and could potentially compensate for reduced Iranian supply by increasing imports from Russia, according to Michael Langham of Aberdeen Investments.

 

Despite the volatility, the recent military actions were not entirely unexpected. The strikes followed a significant build-up of US forces in the Middle East, prompting traders to adjust their market positions in anticipation of potential escalation.

 

Elsewhere in early Monday trading, gold prices — often regarded as a safe-haven asset during periods of uncertainty — rose 2.4% to approximately $5,371 per ounce.

 

Equity markets reflected investor caution. Futures tied to the S&P 500 and the Dow Jones Industrial Average were down roughly 0.8% by mid-morning in Bangkok.

 

Asian stock markets also opened lower. Japan’s Nikkei 225 initially declined by more than 2%. In Hong Kong, the Hang Seng index dropped 1.6% to 26,215.91, while the Shanghai Composite remained largely unchanged at 4,163.01.

 

Taiwan’s benchmark index fell 0.6%, and Singapore’s market retreated 1.9%. In Bangkok, the SET index slid 2.1%, while Australia’s S&P/ASX 200 edged down 0.3% to close at 9,173.50.

By fLEXI tEAM

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