FRANKFURT, Germany — Oil prices rose sharply Monday as disruptions to tanker traffic through the Strait of Hormuz chokepoint raised uncertainty about how U.S. and Israeli attacks on Iran would affect supply to the world economy.
U.S. oil traded 8.40% higher at $72.63 per barrel, while international standard Brent was up 8.5% at $79.13 per barrel.
Higher oil prices raise the prospect of costlier gasoline for U.S. drivers as well as increased prices for other goods at a time when people in many countries have been stung by inflation.
A key focus was the strait at the southern end of the Persian Gulf, through which 20% of the world’s oil supply passes. Tanker traffic dropped sharply amid disruption of satellite navigation systems, data and analytics firm Kpler said on X, while the UK Maritime Trade Operations Centre reported attacks on several vessels in the area on either side of the strait and warned of elevated electronic interference to systems that show where ships are.
A bomb-carrying drone boat struck a Marshall Islands-flagged oil tanker in the Gulf of Oman on Monday, killing one mariner, Oman said.
Iran has been threatening vessels approaching the Strait of Hormuz and is believed to have launched multiple attacks.
Saudi authorities reported they intercepted Iranian drones that attacked the Ras Tanura oil refinery near Dammam and the refinery was shut down as a precaution, Saudi state television reported. Market attention has focused on whether the conflict would widen to other oil-producing countries in the region.
For much Mideast oil, there’s no way around the Strait
There are pipelines that skirt the Strait but they don’t have enough capacity to move all the oil. Saudi Arabia, Iraq and the United Arab Emirates all depend on tankers passing the Strait to get the bulk of their oil to global markets.
Analysts say completely blocking the Strait would hurt Iran too since all of its 1.6 million barrels per day passes through the Strait, most of which goes to China where refineries are less concerned about US sanctions that prevent Iran from selling its oil elsewhere.
The Strait is also a key route for liquefied natural gas. QatarEnergy said Monday it would stop its production of liquefied natural gas as the Mideast war rages, taking one of the world’s top suppliers off the market.
Oil price shock comes as US gas prices were already rising
The price of crude is the single largest factor in how much U.S. motorists pay for fuel at the pump — a highly political issue ahead of midterm Congressional elections.
And gas prices are already rising ahead of the summer driving season when people travel more. The national average for a gallon (conversion) of regular went up by more than 5 cents last week to $2.98, according to motoring club AAA.
The price of crude has less impact in Europe, where taxes make up most of the price of fuel. But higher energy costs can affect prices across the economy. A sustained rise of $15 per barrel could add 0.5 percentage point to consumer prices in Europe, according to Holger Schmieding, chief economist at Berenberg bank.
Temporary price spike?
Monday’s price increase was within the $5-$10 per barrel range expected by analysts based simply on the fear factor associated with the outbreak of war. And some war concerns were already reflected in the price before the conflict started.
However, long-term disruption to ship traffic in the strait could send prices even higher, and so could damage to oil infrastructure in other Gulf countries. Meanwhile, a shorter conflict in which disruptions are easily reversible could mean the current price spike won’t last.
“The key question for the global economy is obvious: Will the Strait of Hormuz be effectively closed for oil and gas exports for more than a few weeks?” Schmieding said. “If so, it would hurt global growth and raise global inflation noticeably. But I would expect Trump to go to great lengths to prevent a lasting surge in energy prices that could hurt him at home ahead of the U.S. midterm elections in November.”
He forecast oil prices would return to $65-$70 per barrel after a near-term spike.
Prices could go higher for longer if the wars spreads
Iran’s attack on the Ras Tanura refinery represents a major escalation, a Middle East analyst said, with Iran demonstrating that key Gulf energy infrastructure is within its reach, and investor sentiment likely to worsen.
Torbjorn Soltvedt, principal Middle East analyst at risk intelligence company Verisk Maplecroft, said Iran’s goal is to raise the economic costs of the conflict for Gulf states like Saudi Arabia and the United Arab Emirates, hoping that these countries will pressure the U.S. and Israel to de‑escalate.
He said that the coming days and weeks will be marked by uncertainty and volatility in global markets, with oil prices likely to push past $80 per barrel.
“If we start to see additional direct attacks against energy infrastructure, not just in Saudi Arabia and Kuwait, but in other countries in the region, then that’s when the market will start to think about a push toward $90 and perhaps even beyond.”
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AP writers Suzan Fraser in Ankara, Turkey, and Jon Gambrell in Dubai, United Arab Emirates, contributed.
