Oil Prices Hold Gains as US-Iran Conflict Escalates, Threatening Strait of Hormuz

Oil prices held onto strong gains in European trading on Monday after an earlier surge of nearly 5%, as renewed military conflict between the U.S. and Iran intensified fears over potential supply disruptions through the critical Strait of Hormuz.

As of 03:43 ET (07:43 GMT), Brent crude futures were up 3.5% to $78.68 a barrel, while West Texas Intermediate (WTI) crude futures climbed 3.5% to $73.89 a barrel. Both benchmarks had jumped by almost 5% earlier in the session.

Tensions Flare in Vital Waterway

The price rally followed reports that Iran expanded missile and drone attacks on Sunday to include Gulf states Qatar and the United Arab Emirates. Tehran also declared the Strait of Hormuz closed after a commercial vessel was hit, according to the source material.

The U.S. administration disputed Iran's claim, with President Donald Trump stating that commercial shipping lanes through the waterway remained open under American military protection. Despite these assurances, shipping operators have adopted a more cautious stance.

Market Impact and Supply Risks

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The heightened security concerns are already impacting physical oil flows. Ship-tracking data revealed a sharp slowdown in traffic over the weekend, with just six vessels transiting the Strait of Hormuz on Sunday—the lowest level in five weeks.

"Shipping operators are adopting a cautious approach and inbound movements have slowed under heightening security concerns," ANZ analysts noted. The brokerage warned that the weekend's attacks have raised new doubts about the stability of an interim agreement reached last month.

Broader Context

The Strait of Hormuz is the world's most important oil chokepoint, serving as the primary export route for major producers including Saudi Arabia, Iraq, and the UAE. Any sustained disruption could significantly tighten global supply, forcing refiners in Asia to seek alternative sources and driving up freight and insurance costs.

Last week, the International Energy Agency (IEA) warned in its monthly report that renewed hostilities could derail an expected recovery in global oil supply if shipping through the strait is persistently disrupted. The agency noted that while global supply rebounded in June, it remained well below pre-conflict levels.