Oil Price Surges Above $90 as Fresh US-Iran Strikes Rekindle Gulf War Fears

Crude oil prices climbed more than two per cent on Monday, with Brent crude rising above $90 a barrel after renewed military exchanges between the United States and Iran raised fresh concerns about global energy supplies.

Brent rose 2.5 per cent to $90.26 per barrel, while US West Texas Intermediate (WTI) crude gained 2.5 per cent to $85.51. The jump came a day after the United States said it had attacked Iranian rocket launchers on an island in the Strait of Hormuz.

Iran responded by targeting US military positions in Jordan, further escalating tensions after a period in which hostilities appeared to be easing. US President Donald Trump subsequently warned that Washington would retaliate against Iranian attacks on American targets in the Middle East.

The renewed fighting has revived fears over the Strait of Hormuz, a crucial global energy route through which about a fifth of the world’s crude oil and gas normally passes. The waterway has remained largely closed, increasing concerns about supply disruptions and pushing investors back towards crude as a geopolitical risk hedge.

“For oil traders, (the) move is another reminder of how quickly the geopolitical premium can return,” said Quintex Intel analyst Stephen Innes. He noted that although physical flows through Hormuz had improved from their worst levels, the latest confrontation showed how vulnerable those gains remained.

The oil rally also came as financial markets reacted to hawkish comments from US Federal Reserve chief Kevin Warsh. US inflation is currently at 3.7 per cent, well above the Fed’s two per cent target, while Warsh suggested at the Jackson Hole symposium that current financial conditions may not be restrictive enough.

His comments have strengthened expectations that the Federal Reserve could raise interest rates in September, although Warsh stopped short of committing to a rate hike. US stocks fell further on Monday, with the Dow Jones Industrial Average down 0.5 per cent at the start of trading, while the S&P 500 fell 0.3 per cent and the Nasdaq dropped 0.2 per cent.

Investors are now turning their attention to key US economic data due over the next two weeks, including jobs figures and inflation data, which could influence the Fed’s next interest-rate decision. Meanwhile, continued uncertainty around the US-Iran conflict means oil markets are likely to remain highly sensitive to developments in the Gulf.