The escalating US-Israel war against Iran has driven crude oil prices higher, with Brent crude climbing further to around $104 per barrel on Monday as the conflict enters its third week.
Oil markets reacted sharply after US President Donald Trump announced over the weekend that American forces had struck military targets on Kharg Island, Iran's primary oil export terminal handling nearly all of the country's shipments.
Trump also issued warnings that further attacks could target energy infrastructure if Iran continues to disrupt shipping through the Strait of Hormuz, the critical chokepoint that has been effectively closed since the operations began on February 28.
Brent crude surged as much as 3% early in trading, reaching highs near $106.50 before settling around $104, while West Texas Intermediate (WTI) traded just above $99 per barrel.Iran's Fars news agency reported no significant damage to oil infrastructure from the strikes.
Iran's Foreign Minister Abbas Araghchi rejected direct talks with Washington, stating on CBS's "Face The Nation" that there was no reason to negotiate after the attacks began. He emphasized that Iran had not sought a ceasefire but was open to discussions with other countries about ensuring safe passage for vessels.
Trump urged nations like China, France, Japan, South Korea, and the UK to deploy warships to secure the strait, posting on Truth Social: “The Countries of the World that receive Oil through the Hormuz Strait must take care of that passage, and we will help — A LOT! This should have always been a team effort, and now it will be.” However, Japan indicated it was not considering maritime security operations, and Australia declined to send navy ships.
Ongoing hostilities included Saudi Arabia intercepting over 60 drones since midnight, and a temporary suspension of flights at Dubai’s airport due to a nearby drone-related fire. Araghchi condemned Israeli strikes on Tehran fuel depots as “ecocide” due to health risks for residents.
Traders' hopes for a quick resolution faded after Trump's economic adviser Kevin Hassett cited Pentagon estimates that the operation could last up to six weeks, though it was progressing ahead of schedule.
To mitigate supply risks, the International Energy Agency coordinated a record release of 400 million barrels from member stockpiles, with Japan beginning draws from its strategic reserves.
Broader markets showed mixed performance amid geopolitical uncertainty and economic data. Asian stocks were largely lower in Tokyo, Shanghai, Sydney, and others, while some like Hong Kong and Seoul rose. Analysts noted that prolonged closure of the Strait of Hormuz posed greater risks to supply and inflation than the end of fighting itself.
Revised US fourth-quarter GDP came in at just 0.7% growth (down from an initial 1.4%), and the Fed's preferred inflation measure stood at 2.8% in January before recent energy spikes. With policy meetings upcoming at major central banks including the Fed, Bank of England, and ECB, comments on the war's economic fallout will be watched closely.
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