Oil futures jumped 3% at the start of the first trading session since the U.S. launched direct attacks against Iran, casting further shadow over the supply outlook in the embattled oil-rich Middle Eastern region.
U.S. crude oil on Sunday evening rose $2.30, or 3.1%, to $76.14 per barrel, while global benchmark Brent jumped $2.38, or 3.1%, to $79.39 per barrel.
President Donald Trump on Saturday surprised markets with the announcement that Washington had directly entered the Iran-Israel conflict, launching attacks against three Iranian nuclear sites in Fordo, Natanz and Isfahan.
Iran’s foreign minister said Sunday that the Islamic Republic reserves “all options” to defend its sovereignty and people, amid ongoing fire exchanges between Iran and Israel.
U.S. Secretary of State Marco Rubio has warned Iran against attempting to close the Strait of Hormuz, a narrow waterway that is critical for the global oil market. Some 20 million barrels per day of crude, or 20% of global consumption, flowed through the strait in 2024, according to the Energy Information Administration.
Iranian state media reported that Iran’s parliament had backed closing of the strait, citing a senior lawmaker. However, the final decision to close the strait lies with Iran’s national security council, according to the report.
“It’s economic suicide for them if they do it, and we retain options to deal with that,” Rubio told Fox News. “It would hurt other countries’ economies a lot worse than ours. It would be, I think, a massive escalation that would merit a response, not just by us, but from others.”
Iran produced 3.3 million bpd in May, according to OPEC’s monthly oil market report released in June, which cites independent analyst sources. It exported 1.84 million bpd last month, with the vast majority sold to China, according to data from Kpler.
Rubio called on China to use its influence to prevent Tehran from closing the strait. About half of China’s waterborne crude oil imports comes from the Persian Gulf, per Kpler.
“I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the Straits of Hormuz for their oil,” Rubio said.
Investors are also watching the odds of a further destabilization of the Iranian regime as a result of U.S.-Israeli hostilities, given the example of the long-spanning impact that the 2011 NATO-led ousting of Muammar Gaddafi had on Libya’s supplies.
Tensions have likewise ramped up in neighboring Iraq, OPEC’s second-largest producer, where pro-Tehran militias have previously threatened Washington, should it target Iran’s supreme leader, Ayatollah Ali Khamenei.
On Sunday, Iran’s Revolutionary Guard warned that “the US bases in the region are not their strength but rather their greatest vulnerability” without specifying particular sites, according to Google-translated comments carried by Iranian news agency Fars.
Fledgling, but revived diplomatic ties between former rivals Iran and Saudi Arabia could meanwhile diffuse the possibility of disruptions in the supply of the world’s largest crude exporter.
“The Kingdom of Saudi Arabia is following with deep concern the developments in the Islamic Republic of Iran, particularly the targeting of Iranian nuclear facilities by the United States of America,” the Saudi foreign ministry said on Sunday. Riyadh, a close U.S. ally in the Middle East, has limited its involvement in the Iran-Israel offensives.
Back in 2019 — four years before resuming diplomatic relations with Iran — Saudi Arabia’s oil installation facilities at Abqaiq and Khurais sustained damage during attacks that were claimed by the Houthis, but for which Riyadh and the U.S. said Iran bore responsibility. Tehran denied involvement.
At the resumption of Israeli-Iranian fire last week, the International Energy Agency’s chief Fatih Birol said the institution was monitoring the developments and that “markets are well supplied today but we’re ready to act if needed,” with 1.2 billion barrels of emergency stocks on standby.
