Global oil prices rose on Monday, with Brent crude futures climbing 3.25pc to $78.48 and U.S. West Texas Intermediate (WTI) gaining 3.29pc to $73.76, as renewed military tensions in the Middle East sparked concerns over energy shipments through the Strait of Hormuz. The market remains sensitive to geopolitical instability, as the narrow waterway served as a transit point for approximately 20pc of the world’s oil and liquefied natural gas before the war began at the end of February.
Market Reaction to Middle East Military Strikes
The surge in oil prices follows a weekend of escalating military activity between the United States and Iran. According to reports, Tehran targeted U.S. facilities across the Gulf region on Sunday, with Iran’s Revolutionary Guards claiming attacks on U.S. military bases in Kuwait and Bahrain.
Ship-tracking data provided by Kpler indicates that vessel traffic through the Strait of Hormuz dropped to a five-week low on Sunday, with only six vessels transiting the waterway. Analysts at ANZ noted that shipping operators are adopting a cautious stance, leading to a slowdown in inbound movements as security concerns intensify.
Strategic Risks and Energy Security
The current price volatility reflects a "risk premium" associated with potential supply disruptions, according to UBS analyst Giovanni Staunovo. While U.S. President Donald Trump stated on Sunday that the Strait of Hormuz remains open to commercial traffic, the situation remains fluid following Iran’s claims that it had closed the strait in response to a vessel traveling on an unapproved route.
The stability of the region is further complicated by the status of a recent interim U.S.-Iranian agreement intended to secure the strait and facilitate long-term peace negotiations. Recent data from the International Energy Agency (IEA) shows that while global oil supply rose by 4.1 million barrels per day (bpd) in June following the agreement, total production remains 9.4m bpd below pre-war levels.
Infrastructure and Future Supply Outlook
Long-term energy security strategies are increasingly focused on bypassing the Strait of Hormuz. Goldman Sachs projects that expanding pipeline capacity in the Middle East could shield over 60pc of pre-war Gulf oil exports from future disruptions by the end of 2028. The bank’s base-case forecast estimates that total effective bypass capacity could exceed 14m bpd by end-2028.
Meanwhile, oil market dynamics are shifting in other regions. In the United Arab Emirates, the Abu Dhabi National Oil Company (Adnoc) set the official selling price for August benchmark Murban crude at $80.01 a barrel, a decrease from the $101.48 recorded in the previous month. Additionally, regional conflict continues to impact energy infrastructure elsewhere, with Ukraine’s Security Service reporting strikes on an oil depot in Russia’s Stavropol region and storage tanks at the port of Kavkaz in the Krasnodar region.
Key Market Data
- Brent Crude: Up 3.25pc to $78.48 per barrel.
- U.S. WTI Crude: Up 3.29pc to $73.76 per barrel.
- Strait of Hormuz Significance: Handles roughly 20pc of global oil and liquefied natural gas.
- IEA Supply Report: Global supply remains 9.4m bpd below pre-war levels.
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