Crude Oil Prices Climb as Iran Threatens Strait of Hormuz Closure After US Strikes: Global Supply at Risk

Global crude oil prices surged sharply on Monday, hitting their highest levels since January, as escalating geopolitical tensions in the Middle East rattled energy markets. The sharp rally was fuelled by reports that the United States had joined Israel in targeting Iranian nuclear facilities over the weekend which has now triggered the fears of supply disruptions from one of the world's most critical oil-producing regions.

Brent and WTI Rally Amid Rising War Risk

As of 8:00 am IST on Monday, Brent crude futures jumped USD 1.31, or 1.71%, to trade at USD 76.77 per barrel, while the WTI crude advanced USD 1.40, or 1.90%, to USD 75.24 per barrel as per Trade Economics data. On Friday both benchmarks closed 3% higher as the tensions escalated.

U.S. President Donald Trump made an announcement on X on Sunday that American forces had destroyed key Iranian nuclear facilities, joining Israel in a coordinated military offensive.

In a post that quickly went viral, Trump wrote: "The damage to the nuclear sites in Iran is said to be 'monumental'. The hits were hard and accurate. Great skill was shown by our military. Thank you!"

Earlier, he had issued a stern warning to Tehran, stating: "ANY RETALIATION BY IRAN AGAINST THE UNITED STATES OF AMERICA WILL BE MET WITH FORCE FAR GREATER THAN WHAT WAS WITNESSED TONIGHT. THANK YOU! DONALD J. TRUMP, PRESIDENT OF THE UNITED STATES."

Iran has vowed to retaliate, fuelling speculation that the conflict could escalate rapidly and possibly disrupt the flow of oil through the Strait of Hormuz, a critical passage for about 20% of the world's crude oil supply.

Strait of Hormuz at Centre of Oil Supply Fears

At the heart of supply concerns is the Strait of Hormuz, a narrow chokepoint through which nearly 20% of the world's crude oil is transported. Iran, the third-largest crude producer within OPEC, has long used threats of closing the strait as leverage, but recent developments suggest that this time the risk may be more serious, as per Trade Economics.

According to Iran's state-run Press TV, the Iranian parliament passed a measure to shut the Strait of Hormuz in response to the U.S. strikes. While the final authority lies with Iran's Supreme National Security Council and Supreme Leader Ayatollah Ali Khamenei, this news has already triggered panic in global shipping circles.

Analysts warn that even partial disruption in the strait could choke global supply lines. Although alternative pipeline routes exist, they are insufficient to fully compensate for the volumes at risk. Experts note that many shipping companies may begin avoiding the region altogether, fearing escalation.

"It's important to recognise that such military strikes are rarely impulsive; they are the outcome of years of war-gaming and strategic planning. Behind the scenes, it is highly likely that backchannel communications are already underway involving key regional players including Israel, Iran, major Asian powers, the U.S., and the EU, all working to prevent a wider escalation that benefits no one. While we may witness a sharp rise in volatility across oil, bullion, and broader financial markets in the immediate aftermath, there is reason to believe that these moves could be contained-assuming diplomatic channels remain active and the situation doesn't spiral." As per a commodity note by Kotak Securities.

Oil Markets React to Geopolitical Shocks

Since the Israel-Iran conflict escalated last week, Brent crude has risen around 14%. Market participants expect oil prices to remain volatile in the coming days. As the situation unfolds, everyone's focus is on Tehran's next move and whether the world is approaching a full-blown oil crisis.