Oil prices climbed more than 3% on Monday, breaching the $90 a barrel mark for Brent crude, following the first direct exchange of strikes between the United States and Iran in a month. West Texas Intermediate futures also saw a significant increase, rising to $85.65 a barrel.
According to U.S. Central Command, U.S. forces conducted strikes on two Iranian launchers on Larak Island. This action was reportedly a response to the Islamic Revolutionary Guard Corps (IRGC) allegedly preparing to deploy sea mines in the Strait of Hormuz, a vital chokepoint for global oil supplies. Navy Capt. Tim Hawkins, a spokesperson for U.S. Central Command, confirmed the strikes, stating that IRGC forces were observed preparing to launch rockets with sea mines into the strait.
Iran subsequently launched an attack targeting U.S. forces in Jordan. However, reports indicate that nearly all incoming missiles were intercepted with minimal impact on the ground. In response to the day's events, President Trump posted on Truth Social, including a video depicting Iran's energy hub, Kharg Island, "being blown to smithereens!!!"
The escalation comes after a period of positive news for oil markets. Analysts from Goldman Sachs had recently noted a rebound in oil exports from the Persian Gulf to approximately two-thirds of pre-war levels. This recovery, with total exports of crude and oil products reaching 15 million to 16 million barrels per day, had suggested prices might remain below $90 for the remainder of the year, contingent on a stable geopolitical environment.
However, the recent hostilities raise questions about the sustainability of this recovery. Tanker traffic through the Strait of Hormuz has been significantly disrupted over the past six months due to the ongoing Middle East conflict. The IRGC confirmed that the attack on Larak Island resulted in casualties, vowing retaliation against the aggressor.
U.S. forces have previously targeted military sites on Larak Island, situated near the Strait of Hormuz, in response to the regime's attacks on commercial vessels and the mining of the waterway. Despite these actions, former President Trump has asserted that the strait, through which approximately 20% of global oil supplies transit, has been cleared of all mines.
Domestically, the situation is compounded by the U.S. Strategic Petroleum Reserve falling below 300 million barrels, its lowest level in over four decades. The U.S. Government Accountability Office has also raised concerns about the operational readiness of this emergency stockpile due to aging infrastructure.
Meanwhile, while crude oil exports have improved, Goldman Sachs analysts warned that flows of liquefied natural gas and refined fuels continue to face challenges. The note indicated that disruptions to these products could pose a greater upside risk to prices in Europe than crude oil.
National average gasoline prices remain above $4 a gallon, according to AAA.