Brent crude prices surged nearly 2% to $78.53 a barrel on Monday, reaching their highest level since January, as the United States joined Israel in launching strikes on Iran’s nuclear facilities. The market’s reaction reflected growing concerns over global oil supply disruptions amid rising geopolitical tensions.
US West Texas Intermediate (WTI) crude also rallied, gaining $1.87, or 2.53%, to reach $75.71 per barrel. Reuters reported Brent futures peaking at $78.89 as of 11:22 GMT.
Strait of Hormuz: A Chokepoint Under Threat
The situation intensified further after Iran’s parliament approved the closure of the Strait of Hormuz, a strategic maritime route through which nearly 20% of global oil and LNG shipments pass. While Iran’s National Security Council will make the final decision, even the possibility of closure is rattling markets.
According to the U.S. Energy Information Administration, over 20 million barrels per day of oil passed through the Strait in 2023. A shutdown could choke global supply and push prices past $100 per barrel.
“Much depends on how Iran responds in the coming hours and days — but this could set us on a path toward $100 oil,” said Saul Kavonic, energy analyst at MST Marquee, reportedly said.
Early Surge Followed by Volatility
Brent crude rose as much as 5% after the weekend strikes, as speculation about US involvement materialized. However, prices pared gains shortly after, suggesting uncertainty about the conflict’s duration and impact.
Despite the price fluctuations, Brent surged 11% over the previous week, briefly touching the $80 mark before cooling off. Analysts believe hopes of a ceasefire and ample supply from OPEC+ capped further gains.
OPEC+ to Meet Again as Supply Hangs in Balance
OPEC+ is set to meet on July 5 to discuss a potential output hike for August. The group already raised production by 4.11 million barrels per day across June and July.
While Iran is the third-largest OPEC+ member and responsible for one-third of global oil output, analysts believe excess capacity from other members could help cushion the blow.
Global Economic Repercussions
The impact of higher oil prices could ripple through global economies. According to Santanu Sengupta of Goldman Sachs, a $10 rise in oil adds 30–40 basis points to inflationary pressure and can hurt macroeconomic stability.
“If crude oil prices rise to $75 per barrel, it will hurt the macroeconomy,” Sengupta told CNBC-TV18.
Sectoral Impact: India and Beyond
In India, higher oil prices are a negative for sectors that rely heavily on crude inputs — such as oil marketing companies (HPCL, BPCL, IOCL), aviation, paints, and tyres. Rising prices could also strain India’s fiscal deficit, though analysts suggest it remains manageable.
Geopolitical Risks Loom Large
As tensions remain high, Iran has said it reserves the right to respond to U.S. and Israeli attacks. While the Trump administration stated there are no further operations planned, any retaliatory strike from Iran could send prices soaring again.
“Trump, who came in as a peacemaker president, has started a new war for the US,” said Russian politician Dmitry Medvedev. “With this kind of success, Trump won’t win the Nobel Peace Prize.”
A look back at the 2019 Saudi Aramco attack shows how prices may not remain elevated if supply disruptions are short-lived, but current market behavior suggests a strong risk premium already in play.
While immediate price hikes reflect investor fears, future movements will largely depend on Iran’s next steps, OPEC+ output decisions, and whether diplomatic efforts can ease tensions.
Until then, the oil market remains volatile, balancing real supply threats with speculation, and the world watches the Strait of Hormuz with bated breath.
