Oil prices climbed above $116 per barrel on Monday, reaching their highest level in nearly two weeks as tensions between Iran, the United States and regional allies intensified, raising fears of wider conflict and prolonged supply disruptions.
Brent crude, the international benchmark, rose more than 3% in early trading, continuing a rally driven by geopolitical risks in the Middle East. The latest surge brings prices close to the $119 level reached on 19 March, highlighting growing uncertainty in global energy markets.
The increase follows warnings from Tehran that it is preparing for the possibility of a US ground invasion. Iranian officials issued strong statements over the weekend, signalling readiness for escalation as the conflict spreads across multiple fronts.
The situation worsened after Iranian-backed Houthi forces launched missiles toward Israel, while Israeli operations expanded in southern Lebanon. These developments have heightened fears that the conflict could widen further, threatening critical energy routes.
Financial markets reacted sharply. Major Asian stock indexes declined in early trading, with Japan Nikkei 225 and South Korea KOSPI both falling more than 4% by 1.30pm (GMT), reflecting investor concerns over rising instability.
Strait of Hormuz disruption deepens global energy crisis
A major factor behind the surge is disruption in the Strait of Hormuz, a key shipping route for global oil and liquefied natural gas supplies. Iran restrictions on maritime traffic have significantly reduced shipments, affecting nearly one-fifth of global energy flows.
Since the start of the conflict, oil prices have risen by nearly 60%, increasing pressure on economies worldwide and forcing governments to consider emergency measures to manage fuel supplies and inflation.
Analysts warn prices could continue rising unless shipping through the strait returns to normal. Some projections suggest oil could exceed $120 per barrel if disruptions persist.
Despite tensions, limited transit has resumed for vessels not aligned with the US or Israel. Pakistani authorities said 20 Pakistani-flagged ships were allowed to pass, describing it as a step toward easing tensions. Malaysian vessels have also been granted clearance.
Shipping activity remains significantly below normal levels. Before the conflict began on 28 February, about 120 vessels passed through the strait daily. Recent data shows only a fraction of that number is currently moving through the waterway.
Diplomatic efforts remain uncertain. The US has issued warnings, including threats against Iran energy infrastructure if control over the strait is not loosened. At the same time, officials have suggested a possible breakthrough in indirect talks.
Iran has rejected US proposals and outlined its own conditions for a ceasefire, including compensation and recognition of its control over strategic waters.
Energy analysts say the full impact of the disruption has yet to be felt. Oil supply chains operate on delayed cycles, meaning shortages could intensify in the coming weeks, particularly in Europe and Asia.
Market experts note that physical oil premiums are rising sharply, indicating tightening supply conditions. The broader economic effects are expected to become clearer in upcoming data releases.
As tensions continue, global markets remain highly sensitive to developments in the region. Traders are closely watching both military actions and diplomatic signals, which could quickly shift the direction of oil prices.
