Oil Prices Jump Over 3% as Renewed US-Iran Conflict Threatens Strait of Hormuz

Oil prices surged in European trading on Monday as escalating conflict between the United States and Iran threatened to disrupt crude flows through the world's most critical energy chokepoint. Prices pared some of their initial gains but remained sharply higher, reflecting a significant geopolitical risk premium being priced into the market.

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

Tensions Flare in the Gulf

The latest rally was triggered by a significant escalation over the weekend. Iran reportedly expanded missile and drone attacks to include Gulf states Qatar and the United Arab Emirates, according to Investing.com. Tehran also declared the Strait of Hormuz closed after a commercial vessel was struck, intensifying concerns over the vital shipping lane.

U.S. President Donald Trump disputed Iran's claim, stating that commercial shipping through the waterway remained open under the protection of the U.S. military. Despite these assurances, market participants and shipping operators have reacted with caution.

Supply Chokepoint Under Scrutiny

The Strait of Hormuz is the primary export route for major producers including Saudi Arabia, Iraq, and the UAE. Any sustained closure would have severe implications for global energy supply, particularly for major importers in Asia.

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Evidence of market anxiety was clear in maritime traffic data, which showed a sharp slowdown in transit through the strait. Key figures include:

• Just six vessels transited the waterway on Sunday.
• This represents the lowest level of traffic in five weeks.

In a research note, analysts at ANZ said that "shipping operators are adopting a cautious approach and inbound movements have slowed under heightening security concerns." The brokerage warned that the weekend's events have cast new doubt on the viability of an interim agreement reached last month.

Broader Market Implications

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 disruptions in the Strait of Hormuz persist. The agency noted that while global supply had rebounded by 4.1 million barrels per day in June, it remained well below pre-conflict levels.

A prolonged crisis could force refiners to seek more expensive alternative supplies and would likely drive up freight and insurance costs. Investors are now watching for any coordinated response from major oil-producing nations or the potential for releases from strategic petroleum reserves to calm markets.