Energy prices surge as Iran conflict escalates

Metro India News | CHICAGO

Oil prices shot up to levels not seen in years on Monday amid escalating tensions in the Middle East following Iran’s appointment of a new supreme leader. The conflict, now in its second week, has disrupted production and shipping, rattling global markets.

Brent crude, the international benchmark, spiked to USD 119.50 per barrel early Monday before settling near USD 106, marking a 14 per cent increase. West Texas Intermediate, the US light crude, briefly rose above USD 119.48 before falling back to around USD 103.

The human and economic toll of the conflict is mounting. Bahrain accused Iran of attacking a desalination plant critical for drinking water. Its national oil company declared force majeure after an Iranian strike set a refinery complex ablaze, temporarily releasing it from contractual shipping obligations. Overnight strikes in Tehran by Israel also caused fires at oil depots, heightening supply concerns.

The war has affected major oil-producing countries in the Persian Gulf. Roughly 15 million barrels of oil, or 20 per cent of daily global supply, usually transit the Strait of Hormuz. Threats from Iranian missiles and drones have largely halted shipments from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE, and Iran. In response, Iraq, Kuwait, and the UAE have cut production as storage tanks fill, while Iran, Israel, and the US have attacked energy facilities, further tightening supply.

Some members of the G7 are considering releasing strategic oil reserves to ease market pressure. French President Emmanuel Macron confirmed the measure is being explored, while finance ministers from the G7 held a video conference on Monday to discuss the impact of rising energy costs. President Donald Trump, however, dismissed the need to tap the US Strategic Petroleum Reserve, saying supplies are sufficient.

The surge in oil and gas prices is affecting households and economies globally. In the US, regular gasoline jumped to USD 3.48 per gallon, up nearly 50 cents from last week, while diesel rose to USD 4.66. Asian economies, heavily dependent on Middle Eastern energy, are seeing higher costs ripple through transportation and industry. In South Korea, the Kospi index fell 6 per cent, and Southeast Asian consumers faced long queues at fuel stations.

China and South Korea have warned about ensuring energy stability and warned against price manipulation. Disruptions to Iran’s 1.6 million barrels per day of exports, primarily to China, could further intensify price pressures. Analysts say the last time oil futures traded near these levels was in 2022 following the Russia-Ukraine war, underscoring the global impact of geopolitical crises on energy markets.

Energy experts warn that sustained high prices could push inflation higher, strain household budgets, and dampen consumer spending, adding pressure to already volatile financial markets.