Crude Jumps on Iran War Escalation

Oil surged as the first impacts of the war in the Middle East began to be felt, with a near halt to traffic through the Strait of Hormuz and disruption at a big refinery in Saudi Arabia upending energy markets.

Brent futures settled about 6.7% higher to settle near $78 a barrel, the biggest gain since June 2025. The commodity extended gains post-settlement after a spokesperson for Iran’s Islamic Revolutionary Guard Corps said the country won’t let oil leave the region, according to state media. Diesel futures – the engine of the global economy – settled at the highest in nearly four years.

The US sent conflicting messages about how long a war with Iran might last as airstrikes continued for a third day, with prolonged fighting poised to further roil energy markets and snarl vital shipping lanes. US President Donald Trump said the conflict is projected to last four to five weeks, but added that the US is prepared to fight longer. US Defense Secretary Pete Hegseth, for his part, rejected the idea of an “endless” war.

The Islamic Republic’s security chief, meanwhile, ruled out negotiations.

The war marks a dangerous new phase for the Middle East and the global oil market. Iran pumps about 3.3 million barrels a day, or 3% of global output, but it wields greater influence over energy supplies given its location alongside the Strait of Hormuz. Oil from the Persian Gulf must pass through the waterway to get to major markets such as China, India and Japan. The chokepoint handles a fifth of the world’s oil and a similar portion of liquefied natural gas.

“In a prolonged conflict scenario, we see oil prices reaching into the $100s per barrel,” Helima Croft, head of commodity markets strategy at RBC Capital LLC, said in a note. “Energy is now clearly in the crosshairs of the Iran war.”

JPMorgan Chase & Co. estimates that a halt in Hormuz lasting 25 days would fill producer nations’ storage tanks, forcing them to cut production. Insurance markets are already scrambling to work out how to price the risk.

The jump in energy costs – if maintained – risks boosting inflationary pressures around the world. That stands to complicate the task facing central bankers including the US Federal Reserve as they seek to manage the pace of price gains, while also supporting growth and employment.

In one of the first big impacts on physical oil assets, Saudi Aramco halted operations at its Ras Tanura refinery after a drone strike in the area, according to people familiar with the matter, adding to a spike in fuel prices. Crude flows from the nearby port continued.

In Europe, LNG surged on Monday after Qatar halted output at the world’s largest export plant following an Iranian drone attack.

A US flagged oil tanker that operates as part of a military fuel supply program was hit in the region, while at least four vessels were targeted on Sunday. Naval forces described the threat as “critical” and swaths of shipowners aren’t transiting. Trump, meanwhile, said US forces “knocked out” ten Iranian naval ships.

The publisher of the Middle East’s main oil benchmark said it won’t accept bids and offers for some grades inside Hormuz, underscoring exactly how the conflict is upending the pricing of grades that are key to some of the world’s biggest oil benchmarks.

The war officially broke out on Saturday, with the US and Israel firing missiles at targets across Iran while urging local people to overthrow the Islamic regime. Tehran responded with a wave of strikes against Israel, as well as US bases and other targets in states including Saudi Arabia, Qatar, the United Arab Emirates, Kuwait and Bahrain.

While the surge in crude prices was the biggest since early 2022, the path ahead is uncertain. That prices haven’t rallied more is partly a result of an oil market that has been relatively well supplied over the past year or so. There were other supply risks on Monday, with loadings halted at a key Russian oil terminal after Ukrainian drone attacks.

In reaction to the widening conflict, OPEC+ agreed at a pre-arranged weekend meeting to raise quotas next month by 206,000 barrels a day. The group – which includes Iran, as well as Saudi Arabia and Russia – had been expected to resume modest hikes before the outbreak of fighting.

Monday’s surge leaves oil prices up about 30% so far this year, while the cost of hauling crude oil from the Middle East to China soared to the highest level on record. Traders have been bracing for the threat of conflict breaking out between the US and Iran since the year began.

“We see Brent oil trading in the $80-to-$90-a-barrel range in our base case over at least the coming week,” Citigroup Inc. analysts including Max Layton said in a note before the start of trading on Monday.

“Our baseline view is that the Iranian leadership changes, or that the regime changes sufficiently as to stop the war within one-to-two weeks, or the US decides to de-escalate having seen a change in leadership and set back Iran’s missiles and nuclear program over the same time frame,” they added.

Morgan Stanley, meanwhile, raised its second-quarter Brent forecast to $80 a barrel from $62.50.

Commodity trading advisers have also joined the move, amplifying the rally. Algorithmic traders are now sitting 82% long in Brent and West Texas Intermediate, with some buying also observed further out along the curve, according to data from Bridgeton Research Group.

Oil Prices

Brent for May settlement traded 6.7% higher to settle at $77.74 a barrel in New York. 


Earlier, that contract rose to as much as $82.37.


West Texas Intermediate for April delivery gained 6.3% to settle at $71.23 a barrel.