Oil prices jumped nearly 4% on Monday after the United States and Iran exchanged fresh military strikes over the weekend, raising concerns about crude supplies from the Middle East and the security of shipping through the Strait of Hormuz.
Brent crude, the international benchmark, rose 3.84% to $78.93 a barrel during trading, recovering part of the losses recorded last week when an interim peace agreement between Washington and Tehran had eased fears of supply disruptions.
The latest rally came after the United States carried out its fourth strike against Iran in a week on Sunday, saying the action was in response to an Iranian attack on a Cyprus-flagged container ship. In turn, Tehran announced that the Strait of Hormuz would remain closed “until further notice,” although U.S. Central Command rejected the claim.
The Strait of Hormuz is one of the world’s busiest oil shipping routes, with around a fifth of global oil consumption passing through the narrow waterway each day. Any threat to traffic through the strait often pushes oil prices higher as traders worry about possible supply disruptions.
The renewed fighting has weakened hopes that the two countries could return to negotiations anytime soon. Iran said the United States must first honour earlier commitments on ensuring safe passage through the Strait of Hormuz and restoring normal Iranian oil exports before any new talks can begin.
Despite Monday’s sharp rise, Brent crude remains about 5% lower than a month ago. However, prices are still more than 14% higher than they were a year earlier, reflecting continued uncertainty in global energy markets.
Higher oil prices could increase fuel costs in oil-importing countries if the gains are sustained, adding pressure on transport costs and inflation.
