Brent crude jumped 10% on Monday after ships were attacked near the Strait of Hormuz, as Iran warned vessels not to pass through the key waterway.
Analysts said “the market isn’t panicking,” but cautioned prices could go “much, much higher” if disruption persists and shipping remains effectively closed.
Brent crude, the global benchmark, jumped to more than $82 a barrel after at least three ships were attacked near the Strait of Hormuz at the weekend. Natural gas prices also climbed sharply, rising by as much as 25%.
Iran warned vessels not to pass through the strategic waterway in the south of the country, through which about 20% of the world’s oil and gas is shipped.
International shipping has almost ground to a halt at the entrance to the strait, prompting concern among analysts that a prolonged conflict could send energy prices significantly higher.
The UK Maritime Trade Operations Centre said two vessels had been struck, and an unknown projectile was reported to have exploded in very close proximity to a third.
Despite the spike, some market watchers urged caution. “The market isn’t panicking,” said Saul Kavonic, head of energy research at MST Marquee.
“There is more clarity that so far, oil transport and production infrastructure hasn’t been a primary target by any side,” he added.
He said investors would be monitoring developments closely. “The market will be watching for signs that traffic through the Strait of Hormuz returns, which would see oil prices subside again.”
After its initial surge, Brent crude eased back to Sh10,191 a barrel, while US-traded oil was up by around 7.6% at Sh9,313.80
However, analysts warned that prices could climb above $100 a barrel if the conflict drags on, with potential knock-on effects for inflation and interest rates.
Robin Mills, chief executive of Qamar Energy, said, “The jump in prices will feed through almost immediately because the oil traders are very much following the news too.”
He added, “At the moment, oil prices are not particularly high, they are still below where they were even two years ago so we’re not in full-blown oil crisis mode yet.”
Market jitters spread to equities. In London, the FTSE 100 opened nearly 1% lower, with airline shares falling after airspace closures across parts of the Middle East.
European markets recorded steeper losses, with France’s CAC-40 down 1.6% and Germany’s Dax dropping 1.7%.
Gold, often viewed as a safe-haven asset in times of uncertainty, rose by 2.3% to Sh696,082.71 an ounce.
On Sunday, the Opec+ group agreed to increase output by 206,000 barrels a day in an attempt to cushion price rises, though some experts questioned how much impact this would have.
Shipping data indicated that at least 150 tankers had dropped anchor in open Gulf waters beyond the Strait of Hormuz. “Because of Iran’s threats, the strait is effectively closed,” said Homayoun Falakshahi from Kpler.
“The vessels have taken a precautionary measure not to enter as the risks are too high and their insurance costs have sky-rocketed,” he said.
He suggested that the US would likely try to protect shipping routes, which, if effective, could prevent a sharp price spike.
But he cautioned that if the strait remained shut for an extended period, prices could go “much, much higher”.
Edmund King, president of the AA, warned the disruption could quickly affect consumers worldwide.
“The turmoil and bombing across the Middle East will surely be a catalyst to disrupt oil distribution globally, which will inevitably lead to price hikes,” he said.
“The magnitude and duration of pump price increases depends on how long the conflict goes on.”
Economists also warned of broader consequences. Subitha Subramaniam of Sarasin & Partners said if oil prices stayed elevated, “it will start to cascade into other prices such as food, agriculture, industrial commodities and that’s just going to really bleed into inflation.”
With inflation recently easing in the UK and the Bank of England having cut interest rates to 3.75%, policymakers now face fresh uncertainty as energy markets react to escalating geopolitical tensions.
Meanwhile, Danish shipping group Maersk said it would pause sailings through the Bab el-Mandeb Strait and the Suez Canal, rerouting vessels around the Cape of Good Hope, reaffirming the growing disruption to global trade routes.
