Oil Surges as Iran-Israel Exchange Threatens Middle East Ceasefire
Yahoo! Finance Canada reported Monday that oil prices surged sharply after Iran and Israel traded military strikes, putting a shaky regional ceasefire under severe strain.
Brent crude climbed as much as 5.1%, briefly touching $97.83 per barrel. West Texas Intermediate rose to near $95 per barrel. Both benchmarks reflected immediate market anxiety over supply disruptions across the Persian Gulf.
Strikes and Counterstrikes Rattle Energy Markets
Israel confirmed it struck military infrastructure inside Iran early Monday. The action was framed as retaliation for prior Iranian missile fire. President Donald Trump had publicly urged Israeli Prime Minister Benjamin Netanyahu to avoid a counter-strike, but Israel proceeded regardless.
Iran answered with additional strikes targeting Israeli air bases at Nevatim and Tel Nof. The Iranian-backed Houthi movement in Yemen separately announced a naval blockade targeting Israeli shipping in the Red Sea.
Trump later called on Tehran to re-engage diplomatically. He also told reporters that he, not Netanyahu, controls the terms of any US-Iran arrangement.
Hormuz Closure Risk Drives the Oil Premium
The Strait of Hormuz remains the core concern for traders. The waterway is effectively near-closed, disrupting crude, refined fuel, and liquefied natural gas flows to global buyers.
Andy Lipow, president of Lipow Oil Associates, said the flare-up illustrates how brittle the existing truce has always been. He warned that prolonged hostilities increase the probability of Iran taking further steps to restrict maritime traffic beyond Hormuz and into the Red Sea.
US Central Command disclosed over the weekend that American forces downed two Iranian attack drones menacing Hormuz shipping lanes. That followed six ballistic missiles fired at Bahrain and Kuwait on Friday, all of which were intercepted.
Background: A Ceasefire That Never Fully Held
The current ceasefire emerged from weeks of negotiations, but critical disagreements were never resolved. Iran has insisted on a simultaneous halt to fighting between Israel and Lebanon as a precondition for any broader deal.
Israel and Lebanon did reach a limited truce last week. However, Hezbollah rejected the arrangement and fighting between Israeli forces and the Iran-backed militia continued through the weekend.
Haris Khurshid, chief investment officer at Chicago-based Karobaar Capital LP, told Yahoo! Finance Canada that the market consistently misjudged how far apart the negotiating parties actually were. He said oil keeps oscillating between deal optimism and the harder reality that neither side has meaningfully shifted its core demands.
Supply Recovery Remains a Long Road
Even a successful peace deal would not immediately restore normal oil flows. Mines laid in the Strait of Hormuz must first be cleared. Shut-in oil fields could take months to bring back online. Energy infrastructure damaged by drone and missile strikes requires significant repair work.
OPEC+ did agree this week to raise collective output quotas by 188,000 barrels per day for July. The decision carries limited practical effect while Gulf export routes remain blocked.
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