Oil prices rose more than 2% on Monday as renewed military exchanges between the United States and Iran, alongside escalating conflict involving Israel and Hezbollah, heightened concerns about global energy supplies and the security of key shipping routes.
U.S. West Texas Intermediate crude futures climbed $2.29, or 2.6%, to $89.65 a barrel, while Brent crude futures gained $2.05, or 2.3%, to trade at $93.17 a barrel.
The gains followed a sharp deterioration in regional security conditions that has cast doubt over hopes for an extension of the ceasefire agreement between Washington and Tehran. Expectations of a diplomatic breakthrough had previously helped push oil prices lower at the end of last week.
The United States said it carried out what it described as self defence strikes against Iranian radar and drone control facilities on Goruk and Qeshm Island over the weekend. Washington said the action was in response to what it called aggressive activities by Tehran.
Iran responded on Monday, with the Islamic Revolutionary Guard Corps claiming responsibility for strikes targeting an airbase allegedly linked to a United States attack on a telecommunications facility on Sirik Island.
The renewed hostilities have complicated efforts to secure a broader agreement aimed at ending months of conflict and resolving long standing disputes surrounding Iran’s nuclear programme.
United States President Donald Trump said on Friday that he would soon decide whether to approve a proposal extending the ceasefire, giving negotiators more time to pursue a permanent settlement. However, analysts warn that any deal would require cooperation from both Israel and Hezbollah, whose conflict continues to fuel instability across the region.
According to a United States official, Washington has proposed a gradual de escalation framework under which Hezbollah would halt attacks on Israel in exchange for Israel refraining from expanding military operations in Beirut.
Energy markets remain particularly focused on the Strait of Hormuz, one of the world’s most important oil and gas transit routes. The narrow waterway normally carries around 20% of global oil and gas shipments, but Iran has effectively restricted traffic through the strait since the conflict erupted earlier this year.
Market analysts say concerns over sea mines in the area continue to cloud prospects for a swift reopening.
Tony Sycamore, an analyst at IG, noted that even if a political agreement is reached, the return of normal energy flows is likely to be gradual rather than immediate.
Reports that Iran may have deployed additional mines in the strait have further heightened concerns. The allegations emerged shortly after United States Defence Secretary Pete Hegseth warned that any attempts to lay new mines would violate existing ceasefire arrangements.
The supply risks outweighed weak economic data from China, where recent figures pointed to slowing factory activity and broader concerns about weakening demand in the world’s second largest economy.
China’s economic slowdown has raised questions about future oil consumption, particularly as exports contract and businesses face increasing cost pressures.
Goldman Sachs said weak demand from China and Europe presents a significant downside risk to its forecast for fourth quarter oil prices. The bank currently expects Brent crude to average around $90 per barrel and West Texas Intermediate around $83 per barrel, though it cautioned that any further disruptions in Middle East supplies could drive prices substantially higher.
The latest market moves underline how geopolitical developments remain the dominant force in global energy markets, with traders balancing concerns about slowing economic growth against the risk of prolonged supply disruptions from one of the world’s most strategically important regions.
