Oil Markets On Edge As Israel-Iran War Sparks Global Supply Worries

The ongoing conflict has revived worries about the security of Middle East oil shipments, particularly those passing through the Strait of Hormuz, a crucial chokepoint for energy exports.

One of the key risks being closely monitored is the potential impact on Iranian oil production, particularly in light of Israel’s strikes reportedly targeting energy infrastructure.

Source : Freepik

Crude oil prices extended their rally into Monday, driven by renewed military exchanges between Israel and Iran that escalated over the weekend, raising alarm over potential disruptions in the global oil supply chain.

The ongoing conflict has revived worries about the security of Middle East oil shipments, particularly those passing through the Strait of Hormuz, a crucial chokepoint for energy exports, reported Reuters.

Early Monday morning, Brent crude futures advanced by $1.12, or 1.5 per cent, reaching $75.35 per barrel. Simultaneously, US West Texas Intermediate (WTI) futures climbed $1.10, or 1.5 per cent, to $74.08. Earlier in the session, both benchmarks had seen gains exceeding $4. This momentum followed a sharp rally on Friday, when both contracts ended the day up 7 per cent, having at one point surged over 13 per cent—marking their highest levels since January.

The latest round of military action between Israel and Iran has not only led to civilian casualties but also intensified global concerns about a possible escalation that could ripple across the region. The Strait of Hormuz, through which approximately 18 to 19 million barrels per day—roughly 20 per cent of global oil consumption—are transported, remains at the centre of these concerns.

Strait of Hormuz in Focus as Market Eyes Iran’s Output

"Buying was driven by the ongoing Israel-Iran conflict, with no resolution in sight," said Toshitaka Tazawa, analyst at Fujitomi Securities. He added, "But as seen last Friday, some selling emerged on concerns of overreaction."

One of the key risks being closely monitored is the potential impact on Iranian oil production, particularly in light of Israel’s strikes reportedly targeting energy infrastructure. Iran, a significant OPEC member, produces about 3.3 million barrels per day and exports more than 2 million barrels of crude and refined fuel. Any disruption to this output, especially if it stems from a blockade or instability near the Strait—could trigger a sharp upward movement in oil prices.

OPEC and its partners, including Russia, hold spare capacity that roughly matches Iran’s output, analysts noted.

Diplomatic Hopes Dim Amid Standoff

Efforts to de-escalate the situation have so far made little headway. US President Donald Trump stated on Sunday that he remains hopeful Israel and Iran can eventually reach a ceasefire, although he added that “sometimes countries have to fight it out first.” Trump reaffirmed continued US support for Israel but did not confirm whether he had urged the country to halt strikes on Iranian targets.

Elsewhere, Germany’s Chancellor Friedrich Merz expressed optimism that the Group of Seven (G7) leaders, meeting in Canada, might form a consensus aimed at defusing the conflict and preventing wider instability.

However, Iran appears unwilling to enter into peace negotiations under current conditions. Citing a source familiar with diplomatic exchanges, the news agency reported that Iran had communicated to mediators from Qatar and Oman that it would not consider a ceasefire while still under active Israeli attack.

With diplomatic efforts stalled and the threat of regional escalation looming large, energy markets are likely to remain on edge in the days ahead.