Oil prices surged more than 2% on Monday after the US attack on Iran’s Larak island triggered retaliation, escalating Middle East tensions that have disrupted global energy markets for six months. The strike on Larak island, a key Iranian oil terminal in the Strait of Hormuz, marked the first known American assault on Iranian territory since late July, and Tehran responded by targeting two US air bases in Jordan, according to Iranian media.
The US attack on Iran’s Larak island, located in the strategic Strait of Hormuz through which a fifth of the world’s oil flows, pushed Brent crude futures up $2.51, or 2.85%, to $90.61 a barrel. US West Texas Intermediate (WTI) crude climbed $2.13, or 2.55%, to $85.53. The price spike reflects growing concerns over supply disruptions, as the conflict enters its sixth month with no end in sight.
US forces struck two launchers on Larak island on Sunday, escalating the military confrontation that has already seen multiple exchanges. Iran’s Revolutionary Guards claimed responsibility for the attack on US bases in Jordan, raising fears of a broader regional war. “Looks like we are in another escalation phase. How long that lasts is impossible to determine. Could be days, could be weeks,” said IG market analyst Tony Sycamore, highlighting the uncertainty gripping traders.
Technical analysts note that if the conflict intensifies and pushes WTI above resistance at $85.80-$85.90 a barrel, it could open the way for further gains, initially targeting last week’s high of $87.69 and then July’s peak of $93.50. However, some market observers remain cautious, as the impact of the US attack on Iran’s Larak island may be tempered by ongoing diplomatic efforts and a slight uptick in oil flows through the strait.
Negotiations to de-escalate the conflict are at an impasse, with mediators struggling to broker a reopening of the Strait of Hormuz. The US Treasury has signaled it will impose new secondary sanctions on Iran nearly every week, aiming to cut the Islamic republic off from the dollar-based financial system. US Treasury Secretary Scott Bessent told Reuters on Sunday that these measures are intended to intensify economic pressure on Tehran.
Despite the latest surge, both Brent and WTI are poised to record small declines in August after dropping more than 4% last week, the first weekly loss in three. The visible number of commodity vessels sailing through the Strait of Hormuz fell to five a day over the weekend, according to shipping data, as companies remain wary of attacks on ships. The United Kingdom Maritime Trade Operations reported a tanker strike on Saturday, further underscoring the risks for maritime traffic in the region.
The attack on Larak island, which hosts significant Iranian oil export infrastructure, has heightened fears of a full-blown supply crisis. ANZ analysts noted in a client note that while the path to a deal reopening the strait is elusive, increases in oil flows have so far kept supply disruption concerns in check. However, the broader geopolitical risk remains a major driver for oil prices, with any further escalation likely to push benchmarks higher.
As the conflict grinds on, the global economy faces renewed uncertainty. The oil market is closely watching for any signs of diplomatic progress or further military action. For now, the focus remains on the US attack on Iran’s Larak island and its implications for energy security, as traders brace for more volatility in the coming weeks.
Source: ARY News