Oil Prices Surge to 3.5-Year High Amid Iran-Israel Conflict & Supply Fears
TOKYO – Oil prices surged to their highest level in more than three and a half years on , driven by the escalating conflict involving the United States, Israel, and Iran, and fears of a prolonged disruption to energy supplies from the Middle East. The conflict’s escalation has raised risks to maritime transport in the strategically vital Strait of Hormuz and triggered a strong reaction in international financial markets.
Asian stock markets tumbled on , even as oil prices jumped more than 25% to over US$110 a barrel, reflecting anxieties surrounding the war, which has entered its second week with no indication of de-escalation. The Seoul stock exchange – which had performed strongly earlier this year due to its technology companies – lost more than 8%, while Tokyo fell by over 7% and Taipei by more than 5%. Significant declines were also recorded in Hong Kong, Shanghai, Sydney, Singapore, Manila, and Wellington.
In early trading, West Texas Intermediate (WTI) crude futures rose by more than 30%, reaching US$118.21 a barrel, their highest level since . The benchmark contract had already risen 12% on and has accumulated an increase of nearly 36% over the past week.
Brent crude, the international benchmark, also registered substantial gains, climbing 27.54% to US$118.22 per barrel, after increasing by approximately 28% last week. The rally is occurring amid growing concerns about the conflict’s impact on crude production and transportation in the Persian Gulf region.
Concerns are particularly focused on the Strait of Hormuz, a narrow waterway through which approximately 20% of global oil supplies typically transit. According to research firm Rystad Energy, around 15 million barrels per day pass through this crucial passage connecting the Persian Gulf to the rest of the world. However, since the start of military operations on , many tankers have avoided traversing it due to fears of Iranian missile or drone attacks.
several vessels have been hit in recent days, and many shipping companies have temporarily suspended transit through the area. Producing countries such as Iraq, Kuwait, and the United Arab Emirates have begun to reduce their output due to the inability to export normally and the rapid filling of their storage facilities.
The situation is exacerbated by attacks on energy installations in the region. Since the beginning of the war, Iran, Israel, and the United States have bombed oil and gas infrastructure, intensifying concerns about global supply.
The rising cost of oil threatens to increase the cost of living and could put upward pressure on interest rates in various countries, at a time when many economies are still grappling with the aftermath of global inflation in recent years.
“The global economy remains dependent on the concentrated flow of oil and natural gas from the Middle East through the Strait of Hormuz,” warned Bruce Kasman, chief economist at JPMorgan. According to the analyst, in the short term, the price of crude oil could approach US$120 per barrel before moderating if the conflict eases.
However, Kasman cautioned that if a clear political solution is not reached soon, Brent could continue to rise in the coming months, which would reduce global economic growth and increase global inflation.
United States President Donald Trump downplayed the increase in oil prices, stating that it is a “small price to pay” in the face of the goal of eliminating the Iranian nuclear threat and ensuring international security. In a message posted on his Truth Social network, the president affirmed that the increase in crude oil prices is a “small price to pay” to guarantee the security of the United States and the world, and maintained that prices will fall rapidly once the threat of the Iranian nuclear program is eliminated. According to Trump, “only fools would consider otherwise.”
Meanwhile, the U.S. Secretary of Energy, Chris Wright, assured that the government is working with shipping companies to restore tanker traffic in the Persian Gulf and estimated that the situation could normalize “within weeks,” possibly under U.S. Military protection.
“I don’t think it will be long before we see a more regular resumption of ship traffic through the Strait of Hormuz,” said Chris Wright, the Secretary of Energy, in an interview on CNN’s “State of the Union” program.
With information from AFP, AP and Reuters