Oil Prices Surge More Than 2% as US-Iran Clashes Revive Strait of Hormuz Supply Fears

Key Takeaways

• Brent crude climbed 2.52% to $90.32 a barrel, while WTI advanced 2.41% to $85.41 during early Monday trading.
• The rally followed US strikes on two Iranian rocket launchers near Larak Island, ending a month-long pause in direct American military action against Iran.
• Reduced shipping through the Strait of Hormuz, falling global inventories and the risk of further retaliation could keep crude prices volatile.

Oil prices jumped more than 2% on Monday after renewed fighting between the United States and Iran raised fresh concerns about energy shipments through the Strait of Hormuz.

Brent crude futures gained $2.22, or 2.52%, to $90.32 a barrel by 22:02 GMT. US West Texas Intermediate crude rose $2.01, or 2.41%, to $85.41 a barrel. The gains briefly pushed the international benchmark back above the psychologically important $90 level.

The move came after US forces struck two Iranian rocket launchers near Larak Island on Sunday. The operation marked the first confirmed American attack on Iranian territory since late July and interrupted a period of reduced military activity in the six-month conflict.

Although the latest operation was limited in scale, its location was particularly important to energy markets. Larak Island sits inside the Strait of Hormuz, a narrow waterway that normally carries around one-fifth of the world’s oil supplies.

US Strike Ends Month-Long Lull in Fighting

US Central Command said forces linked to Iran’s Islamic Revolutionary Guard Corps had been preparing to launch rockets carrying sea mines into international shipping routes. American officials described the response as a limited and precise operation intended to protect civilian vessels and commercial traffic.

Iran disputed that account and described the attack as an act of aggression. The Revolutionary Guard reported casualties among Iranian personnel and civilians but did not disclose exact numbers.

Tehran subsequently said it had fired ballistic missiles at US military sites in Jordan. Jordan’s armed forces reported intercepting eight missiles that entered the country’s airspace early Monday.

The exchange represented the first direct US-Iran confrontation in more than a month. The last confirmed American strikes occurred on July 29, when US forces attacked multiple Revolutionary Guard surveillance and defence facilities.

The renewal of military action has weakened expectations that Washington and Tehran could move towards sustained de-escalation in the near term. It has also increased the possibility of further attacks on ships, ports or energy infrastructure around the Persian Gulf.

Strait of Hormuz Remains the Market’s Main Concern

Oil traders are primarily focused on whether the latest confrontation will disrupt the gradual recovery in shipping through the Strait of Hormuz.

Commercial traffic remains far below pre-war levels despite recent mine-clearing operations. US officials said 24 vessels passed through the strait during the previous week, compared with approximately 130 ships per day before the conflict began.

The US Energy Information Administration estimated that crude oil and petroleum liquids moving through Hormuz averaged 4.9 million barrels per day during the second quarter of 2026. That was sharply lower than the 21.6 million barrels per day recorded in the fourth quarter of 2025, before the conflict disrupted regional trade.

Shipping restrictions have forced Gulf producers to reduce output, redirect exports or place crude into storage. Some supplies have been moved through Saudi Arabia’s East-West pipeline and the Bab el-Mandeb Strait, but alternative routes have limited capacity and can involve higher transportation costs.

A tanker was also struck by an unidentified projectile north of Khasab, Oman, on Saturday. No casualties or environmental damage were reported, and responsibility for the incident remained unclear.

These developments help explain why even a relatively contained military operation produced an immediate reaction in crude prices. The market is not only pricing the barrels currently unavailable but also the possibility that another escalation could interrupt the limited traffic still moving through the region.

Falling Inventories Add to the Oil Risk Premium

The geopolitical risk premium is being reinforced by tightening global oil balances.

The EIA estimated that worldwide oil inventories declined by an average of 4.2 million barrels per day during the second quarter. It projected another average drawdown of 3.8 million barrels per day in the third quarter as constrained Gulf exports continue to remove supply from the market.

The agency’s August outlook forecast Brent crude averaging approximately $85 a barrel in the third quarter. It expected the benchmark to ease towards an average of $78 in the fourth quarter if Hormuz traffic improves and suspended production gradually returns.

However, those projections were completed before the latest US-Iran exchange. A prolonged disruption or renewed attacks on commercial vessels could delay the anticipated recovery in production and exports.

In contrast, a return to military restraint, further mine-clearing progress and a sustained increase in tanker traffic could reduce the geopolitical premium and place downward pressure on prices.

Higher Fuel Costs Increase Political and Inflation Pressure

The effects of the conflict are extending beyond crude markets. Higher oil prices have already lifted US fuel costs and created additional inflation concerns ahead of the November midterm elections.

The national average price of regular gasoline stood at approximately $4.08 per gallon on August 30, with prices considerably higher in states including California, Hawaii and Washington.

A sustained return of Brent above $90 could keep refining and transport costs elevated, potentially feeding into consumer prices through gasoline, aviation, logistics and manufactured goods.

Higher energy inflation may also complicate the interest-rate outlook. Central banks generally look through short-lived commodity shocks, but a prolonged rise in fuel prices can influence inflation expectations and household spending.

For equity markets, the consequences are likely to vary by sector. Energy producers may receive support from stronger crude prices, while airlines, transport companies and other fuel-intensive businesses could face higher operating costs. Oil-importing economies may also experience renewed pressure on trade balances and currencies.

Oil Outlook Hinges on Retaliation and Shipping Flows

The immediate direction of crude prices will depend on whether the latest exchange remains contained.

Further Iranian retaliation, additional US strikes or new attacks on tankers could push Brent more firmly above $90 and increase the risk of another sharp price spike. Any evidence of new mines in international shipping lanes would be particularly significant because clearing them could delay the normalisation of commercial traffic.

At the same time, crude prices could surrender part of Monday’s gains if both sides avoid further military action and more vessels resume passage through Hormuz.

For now, the market continues to price an unusually high level of uncertainty. With global inventories declining and Gulf export capacity still constrained, developments around the Strait of Hormuz are likely to remain the dominant short-term driver for both Brent and WTI crude.