Oil prices surged over 4% on Monday following renewed attacks between the United States and Iran regarding control of the critical Strait of Hormuz. Brent crude, the international benchmark, rose by more than 4% to $79.26 a barrel, its highest point since June 22, while US-traded oil also increased by 4.3% to $74.50. This surge comes after prices had returned to pre-conflict levels in June following a memorandum of understanding signed between Washington and Tehran to end the war, highlighting the fragility of that earlier agreement.
The escalating conflict, which saw the US Central Command (CENTCOM) carrying out strikes on Iran and Iran allegedly attacking a commercial ship, has led to a sharp decline in maritime traffic through the Strait of Hormuz, a vital conduit for one-fifth of global oil trade in peacetime. Prior to the war, approximately 130 vessels transited the strait daily, but only six vessels were tracked crossing between Thursday evening and Friday morning. Iran's Revolutionary Guards even claimed the strait would be closed until further notice, though CENTCOM affirmed it remained open.
Despite the recent jump, market analysts like Fabien Yip from IG believe oil prices are unlikely to reach the much higher levels seen earlier in the war, which exceeded $120 a barrel in April. This is attributed to slow demand recovery, releases from stranded tankers, and expanded OPEC+ output quotas contributing to an already oversupplied outlook. Mukesh Sahdev of XAnalysts expects Brent prices to remain in the upper $70s during August and September, with occasional spikes and dips.
The renewed fighting also impacted Asian stock markets, with Japan's Nikkei 225 falling over 2%, South Korea's Kospi plunging more than 8% (led by tech firms like SK Hynix and Samsung), and Hong Kong's Hang Seng Index dropping about 0.2%. The dollar strengthened due to safe-haven buying and expectations that the Federal Reserve may need to hike interest rates further to counter war-fueled inflation.
