Oil Prices Set to Soar Amid US-Israel Strikes on Iran, Disrupting Global Markets
The price of oil is expected to surge dramatically on Monday, with US crude oil projected to rise by 9% as trading resumes, following US-Israel military strikes on Iran over the weekend. This escalation has rattled investors globally, prompting fears of significant supply disruptions through the critical Strait of Hormuz, a key chokepoint for oil shipments.
Market Reactions and Projections
According to data from the broker IG, US crude oil could climb to more than $73 a barrel when trading resumes in New York late on Sunday, up from $67 a barrel on Friday night. This would mark the highest level since June 2025, when the US launched strikes on Iran's nuclear facilities, and is likely to lead to higher prices for motorists at the pump. Analysts at Barclays have warned that the oil price could reach $80 a barrel in the event of a "material supply disruption," while RBC analysts highlighted that regional leaders cautioned Washington about the risks, indicating that oil prices exceeding $100 per barrel are a clear and present danger.
Impact on Global Stock Markets
Stock markets around the world are bracing for a downturn on Monday. In London, the FTSE 100, which hit a record high on Friday and was close to breaking 11,000 for the first time, is expected to fall by approximately 0.5%. Global investors are anticipated to seek safe-haven assets, with gold rising 2.25% to almost $5,400 an ounce on IG's weekend markets and silver trading 3.2% higher. Tony Sycamore, a market analyst at IG, noted that the strikes have added fresh geopolitical uncertainty, particularly around potential disruptions in the Strait of Hormuz.
Strait of Hormuz Closure and Supply Chain Disruptions
About a fifth of global oil consumption passes through the Strait of Hormuz, and its closure would disrupt shipments from major producers such as Saudi Arabia, the United Arab Emirates, Iraq, Kuwait, and Iran, leading to shortages and higher energy prices. Reuters reported that several tanker owners, oil majors, and trading houses have already suspended crude oil, fuel, and liquefied natural gas shipments through the strait. Additionally, OPEC+ is meeting on Sunday and could consider increasing oil output by more than expected to counter the disruption, with eight countries agreeing in principle to raise output by 206,000 barrels per day in April, compared to original expectations of a 137,000 bpd rise.
Regional Market Fallout and Insurance Costs
Most stock markets in the Gulf region fell on Sunday, with Saudi Arabia's market losing 2.5%, driven down by financial stocks, industrial companies, and utilities. However, shares of the oil giant Saudi Aramco rose by 2.5% following the jump in crude prices. In a significant move, the Kuwait Stock Exchange suspended trade until further notice, citing the "exceptional circumstances" the country is facing. The conflict has also driven up the cost of insuring ships in the region, with Dylan Mortimer, marine hull UK war leader at Marsh, warning that attacks on shipping could have major repercussions across war insurance rates.
International Monitoring and Ongoing Risks
The International Energy Agency (IEA) is actively monitoring events in the Middle East and their potential implications for global oil and gas markets. Fatih Birol, the IEA's director, stated that markets have been well supplied to date and that he is in contact with ministers from major producers and IEA governments. The situation remains fluid, with ongoing risks highlighted by an attack on an oil tanker in the Strait of Hormuz on Sunday, which injured four mariners, according to Oman's state-run news agency.
