Oil Prices Jump Nearly 20% Amid Escalating Mideast War

A pump jack operates at sunset in an oil field in Midland, Texas US on 22 August 2018.

Global oil prices surged nearly 20% on Monday, reaching their highest level since July 2022, as the widening conflict involving United States, Israel and Iran disrupted energy supplies from the Middle East and raised fears of prolonged shipping disruptions through the vital Strait of Hormuz.

Several regional producers have already begun cutting output as exports face mounting obstacles. Iraq and Kuwait have started reducing production, while earlier supply cuts in liquefied natural gas were reported from Qatar.

Analysts warn that other major producers such as United Arab Emirates and Saudi Arabia may also be forced to curb output if storage facilities reach capacity and export routes remain blocked.

The conflict has heightened concerns about supply disruptions across the global energy market. Even if fighting subsides quickly, experts say it could take weeks or months for supply chains and damaged facilities to recover, keeping fuel prices elevated for businesses and consumers worldwide.

Benchmark Brent crude rose as much as $18.35, or nearly 20%, to $111.04 a barrel during trading before settling around $107.93. Meanwhile, West Texas Intermediate crude climbed about 18% to $107.40 a barrel after briefly hitting $111.24 earlier in the session.

Prices had already surged sharply last week, with Brent gaining 27% and WTI rising more than 35% as the conflict intensified.

Daniel Hynes, a senior commodity strategist at ANZ, said the latest price rally was driven by reports that Middle Eastern producers are reducing output as storage tanks rapidly fill up.

He warned that if producers begin shutting down oil wells due to limited storage and export capacity, the impact on global supply could last even longer. Restarting production after wells are closed can also delay recovery once the conflict eases.

Industry sources said oil production in southern Iraq has dropped by about 70%, falling to roughly 1.3 million barrels per day because shipments through the Strait of Hormuz have been disrupted. An official at the state-run Basra Oil Company said crude storage facilities have already reached maximum capacity.

In Kuwait, the state-owned Kuwait Petroleum Corporation has begun reducing output and declared force majeure on shipments, signalling further supply uncertainty.

Tensions have also threatened key energy infrastructure. Authorities in the UAE reported a fire in the oil industry zone in Fujairah after debris fell in the area, while Saudi Arabia said it intercepted a drone heading toward the Shaybah oilfield.

Meanwhile, Iran announced that Mojtaba Khamenei will succeed his father Ali Khamenei as the country’s supreme leader, a move analysts say signals the continued dominance of hardline leadership in Tehran.

Commodity analyst Satoru Yoshida of Rakuten Securities said the leadership change could complicate efforts to end the conflict and may keep the Strait of Hormuz closed, sustaining upward pressure on oil prices.

He predicted that U.S. benchmark oil could soon rise to $120 or even $130 per barrel if supply disruptions persist.

As prices climbed, Chuck Schumer, the Democratic leader in the United States Senate, urged President Donald Trump to release crude from the country’s Strategic Petroleum Reserve to stabilise markets and ease pressure on consumers.