Oil prices rose on Monday during a highly volatile trading session following U.S. alignment with Israel in striking Iran’s nuclear facilities over the weekend. Investors are evaluating potential risks to global oil supply as conflict escalates.
Brent crude futures climbed 78 cents or 1.01% to $77.79 a barrel by 10:00 GMT. U.S. West Texas Intermediate (WTI) rose 76 cents or 1.03% to $74.60 a barrel.
Major Escalation: Trump Claims Destruction of Nuclear Facilities
President Donald Trump stated he had “destroyed” Iran’s key nuclear facilities in the weekend strikes — a major escalation in the Middle East conflict. Iran vowed to defend itself.
Israel launched fresh strikes on Monday targeting Tehran and the Fordow nuclear facility, which was also hit by the U.S.
Iran Warns, China Blames U.S. for Undermining Credibility
Iran, OPEC’s third-largest oil producer, said the U.S. strikes expanded the range of “legitimate targets” for its armed forces. It called Trump a “gambler” for joining Israel’s military campaign.
Meanwhile, China criticized the U.S. action as severely damaging Washington’s credibility, warning that the situation could spiral “out of control.”
Volatility Surges as Oil Hits Five-Month Highs, Then Retreats
Monday’s session was highly volatile: Brent and WTI reached five-month highs of $81.40 and $78.40 respectively before retreating and turning negative in early European trading, only to rise again by about 1%.
Since the conflict erupted on June 13, prices have climbed on fears that Iran could retaliate by closing the Strait of Hormuz, through which nearly 20% of global oil supply passes.
Risk Premium Persists Despite No Supply Disruptions Yet
Despite no immediate supply disruptions, markets are still pricing in a geopolitical risk premium.
Giovanni Staunovo of UBS said, “The geopolitical risk premium has started to fade given the absence of supply disruption. But as long as the conflict’s outcome remains uncertain, market participants will continue to price in the risks. Prices are likely to remain volatile in the near term.”
All Eyes on Strait of Hormuz — Even Threats Can Move Prices
Ole Hansen of Saxo Bank stated, “All eyes remain on the Strait of Hormuz and whether Iran will attempt to disrupt tanker traffic.” He added, “Prices could spike even without actual disruption if threats are sufficient to delay shipments.”
Goldman Sachs projected in a Sunday report that Brent could temporarily hit $110 per barrel if half of the Strait’s traffic were disrupted for one month, with supply remaining 10% lower for the following 11 months.
However, Goldman’s base case assumes no major disruption due to global efforts to avoid a severe supply crisis.
Iran Could Pay an Economic Price for Closing the Strait
Sughanda Sachdeva of SS WealthStreet noted that the Strait is vital for Iran’s oil exports—a key revenue source. A prolonged closure could cause significant economic harm to Iran, making it a “double-edged sword.”
U.S. Secretary of State Marco Rubio urged China to dissuade Iran from closing the Strait, stating, “China relies heavily on the Strait of Hormuz for oil imports.”
China is Iran’s top oil customer and maintains friendly relations with Tehran.
Iran Hints at Military Option, Decision Rests with National Security Council
Iran’s Foreign Minister said Sunday that the country “reserves all options to defend its sovereignty,” after the U.S. bombed three nuclear sites.
Iranian state media reported that Parliament endorsed a proposal to close the Strait, though the final decision lies with the Supreme National Security Council.
Global Economic Fallout Could Be Severe
Closing the narrow Strait between Iran and Oman could trigger catastrophic consequences for the global economy. According to the U.S. Energy Information Administration, around 20 million barrels per day passed through the Strait in 2024—about 20% of global consumption.
Goldman Sachs and Rapidan Energy both project oil prices could exceed $100 per barrel if the Strait is closed for a long duration. However, J.P. Morgan believes the likelihood is low, viewing such an action as an act of war from the U.S. perspective.
Rubio called the idea of closing the Strait “economic suicide” for Iran, given its dependence on that route for oil exports.
Iran’s Oil Exports at Risk — China Would Be Hardest Hit
Iran is the third-largest OPEC producer, pumping 3.3 million bpd. It exported 1.84 million bpd last month, mostly to China, according to Kpler data.
Matt Smith, lead oil analyst at Kpler, told CNBC, “It would be self-inflicted damage — closing the Strait would halt oil exports to China, cutting off a major income stream.”
U.S. Fifth Fleet on Alert, Response Likely to Be Broad
Secretary Rubio confirmed the U.S. retains multiple options to respond to any Iranian move to close the Strait.
“The impact will hurt other economies more than ours. It would be a massive escalation that demands a response — not just from us, but from other powers too,” he said.
The U.S. Fifth Fleet, based in Bahrain, is tasked with protecting commercial navigation in the Gulf. Many oil traders believe the Navy could quickly counter any Iranian attempt to block the Strait.
However, Bob McNally, founder of Rapidan Energy and a former energy advisor to President George W. Bush, warned the market may be underestimating the risk.
“We believe Iran could disrupt shipping in the Strait far longer than markets expect — weeks or even months, not just hours or days,” McNally said.
