Oil and gas prices surge as Iran war disrupts Middle Eastern output

Oil and gas prices surged on Monday following Israeli and U.S. strikes on Iran and retaliation by Tehran that forced shutdowns of oil and gas facilities ‌across the region and disrupted shipping in the crucial Strait of Hormuz.

A prolonged conflict in the Middle East could lead to a sustained rise in oil prices, fuelling inflation that could undermine global economic growth and push up U.S. retail gasoline prices as well.

Brent crude futures rose as much as 13% to $82.37 a barrel, highest since January 2025, before settling up $4.87, or 6.7%, at $77.74 a barrel. The contract surged in post-close trading after ​Iran’s Revolutionary Guards late Monday said they would set fire to any ship attempting to transit the Strait of Hormuz.

U.S. West Texas Intermediate crude closed at $71.23, up $4.21, or 6.3%. The ​benchmark at one point gained more than 12% to $75.33, highest since June.

The initial surge in oil prices was less dramatic than some analysts had ⁠predicted, but Iran’s retaliatory attacks on other key energy-producing countries like Saudi Arabia and Qatar fanned fears that a longer, protracted back-and-forth would risk additional supply disruptions.

“Key questions are ​how much supply will be lost, for how long, and how do major powers react?” said Daniel Yergin, vice chairman at S&P Global.

On Monday, Saudi Arabia shut its biggest domestic oil refinery ​after a drone strike. Qatar halted production of liquefied natural gas and state-owned QatarEnergy was set to declare force majeure on LNG shipments. The widening Iran conflict also left 150 ships stranded at anchor around the Strait of Hormuz after a seafarer was killed and at least three tankers were damaged.

DISRUPTIONS TO SHIPPING

On a typical day, ships carrying crude oil equal to about one-fifth of global demand sail through the Strait of ​Hormuz along with tankers hauling diesel, gasoline and other fuels to major Asian markets including China and India. The waterway is also the conduit for about 20% of the ​world’s liquefied natural gas.

JPMorgan said a three- to four-week squeeze on Strait of Hormuz traffic could force Gulf producers to shut output and push Brent above $100.

Kenny Zhu, research analyst at Global X, said ‌the North American ⁠energy complex was well positioned to hedge against disruptions should there be any lasting impacts on global energy trade.

The relatively muted response in U.S. natural gas markets versus European and Asian benchmarks illustrates that point. Front-month natural gas futures rose 10.1 cents, or 3.5%, to $2.96 per million British thermal units on Monday.

However, the Dutch front-month contract at the TTF natural gas hub , the benchmark European price, settled up about 40% at 44.51 euros per megawatt hour (MWh) on the Intercontinental Exchange. Asian LNG prices jumped almost 39% on Monday with the S&P Global Energy Japan-Korea-Marker (JKM), ​widely used as an Asian LNG benchmark, at $15.068 ​per million British thermal units (mmBtu), Platts ⁠data showed.

OIL SUPPLY OUTSTRIPS DEMAND

Global tensions have contributed to a 19% rally in Brent this year, while WTI has gained about 17%, even though the International Energy Agency and other analysts believe the market is well supplied, with extra output from producers such as the United ​States, Guyana and OPEC+ expected to outpace global demand this year.

OPEC+ agreed on Sunday to raise oil output by 206,000 barrels per ​day in April. Every ⁠OPEC+ producer is essentially producing at capacity except for Saudi Arabia, RBC Capital analyst Helima Croft said.

Globally, visible oil inventories stood at 7.827 million barrels, enough for 74 days of demand, which is near a historical median, Goldman Sachs wrote in a note.

Average U.S. retail gasoline prices crossed $3 a gallon for the first time since November on Monday. Analysts expect the widening conflict to further ⁠increase prices ​in the coming days.

U.S. ultra-low-sulfur diesel futures rose to a two-year high on Monday at $2.90, gaining about 9%, ​while gasoline futures rose about 4%.

“While we do not know where these disruptions will end or how the conflict will ultimately resolve, the near-term result is likely to be heightened volatility in global energy markets and a ​potential rerouting of global oil and gas cargoes,” said Global X’s Zhu.