Oil prices swing wildly as Iran war threatens supplies, then ease briefly

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Oil prices swung sharply in volatile trading as the widening Iran war threatened energy supplies across the Middle East, then pulled back after President Donald Trump publicly signaled the conflict could be nearing an end. On Monday, markets reacted to fears that the war was disrupting production and shipping routes, pushing benchmark crude higher before a quick reversal later in the day.

Brent crude briefly surged to $119.50 per barrel and West Texas Intermediate briefly rose to $119.48 per barrel, in moves traders connected to expanding concerns about supply losses from the fighting. Those prices then fell to under $90 late Monday as markets reassessed the outlook for the war after Trump told CBS News he thinks “the war is very complete.”

The pricing moves tracked broader disruptions tied to the conflict now in its second week, as multiple countries and energy-linked infrastructure in the region faced increased pressure. The fighting and reported strikes have also raised concerns about whether oil and gas facilities can keep operating and whether shipping routes can function normally.

Fears focused heavily on the Strait of Hormuz, where tanker traffic has been “all but” stopped in the aftermath of threats of Iranian missile and drone attacks. The route carries a fifth of the world’s oil on a typical day, according to independent research firm Rystad Energy, and the disruption forced major producers in the region—including Iraq, Kuwait and the United Arab Emirates—to cut output because of export constraints tied to storage limits.

The war has also included strikes on oil and gas facilities by Iran, Israel and the U.S., according to the report, and it affected other civilian and energy-related targets over the weekend. In Tehran, oil depots were described as smoldering after Sunday strikes by Israel, and Bahrain accused Iran of striking a desalination plant vital to drinking water supplies. Bahrain’s national oil company also declared force majeure for shipments after an Iranian attack set its refinery complex ablaze, a legal step the report said can release the company from contractual obligations due to extraordinary circumstances.

Some analysts warned that the shock could escalate beyond a temporary logistics problem. Nicholas Mulder, a Cornell University history assistant professor who studies the economic impacts of wars, said, “In economic terms, this is already the largest oil supply shock ever,” adding that the situation is producing “roughly three to four times as many barrels of oil lost as during the 1973 and 1979 oil crises.”

Jim Burkhard, vice president and global head of crude oil research at S&P Global Energy, said the crisis had evolved past “transporation” concerns and into a supply and storage challenge, noting that restoring outputs would be “a massive technical exercise that could last weeks or more.” Macquarie Research strategists projected that if the Strait of Hormuz stayed closed for only a few weeks, the price of crude could reach $150 per barrel or higher—above prior peaks of about $147 reached ahead of the 2008 financial crisis—though Oxford Economics expected a pullback toward an average $80 a barrel for the quarter while cautioning that “the risk of a more prolonged crisis has clearly increased.”

As prices rose, officials and governments discussed whether to draw on emergency stockpiles. The Group of Seven, meeting with French Finance Minister Roland Lescure chairing, said it decided against using strategic reserves “at least for now,” and Lescure told reporters in Brussels that the bloc was “ready to take necessary and coordinated steps in order to stabilize markets, such as strategic stockpiling.” Trump, by contrast, downplayed the need to tap the U.S. Strategic Petroleum Reserve on Saturday, saying U.S. supplies were ample and that prices would fall.

Higher oil and natural gas costs have begun rippling through fuel prices and broader economic costs, with impacts ranging from jet fuel and car gasoline to household energy bills. The report noted that Asian economies could face particular vulnerability because of heavy reliance on imports from the Middle East, and said Iran exports about 1.6 million barrels of oil a day, mostly to China, which has called for an immediate end to the fighting.

In the United States, prices at the pump climbed, with the report citing AAA’s estimate that the average price of a gallon of regular gasoline rose to $3.48 on Monday, and that diesel sold for about $4.66 a gallon. Elsewhere, South Korean President Lee Jae Myung warned of strict penalties for refiners and gas stations caught hoarding or colluding on prices, and the report described longer lines outside filling stations across Southeast Asia as motorists faced the higher costs.