Global oil prices have jumped above $100 (£75.11) a barrel for the first time since 2022 as the escalating US-Israeli war with Iran has fuelled fears of prolonged disruption to shipments through the Strait of Hormuz.
Iran on Sunday named Mojtaba Khamenei to succeed his father Ali Khamenei as Supreme Leader, signalling that a week into the conflict hardliners remain in charge of the country.
The US and Israel launched fresh waves of airstrikes across Iran over the weekend, hitting multiple targets including oil depots.
Major disruptions to energy supplies from the region threatens to push up prices for consumers and businesses around the world.
On Monday morning in Asia, Brent crude was almost 18% higher at $109.25, while Nymex light sweet was up by more than 20% at $109.37.
Stock markets in the Asia-Pacific region fell sharply in early trading on Monday, with Japan’s Nikkei 225 index down by more than 5%, the Kospi in South Korea slipped by more than 6% and the ASX 200 in Australia almost 4% lower.
Many in the markets predicted that oil would hit the $100 a barrel mark this week.
In the event it took about a minute to jump 10%, and then another 15 minutes to rise a further 10% in early Asian trading.
Last week the markets had been relatively relaxed about the seeming nightmare scenario for millions of barrels of crude and liquefied natural gas trapped in the Gulf, unable or unwilling to transit the Strait of Hormuz.
But the escalations over the weekend, alongside scenes of destruction of energy infrastructure both in Iran and across the Gulf, saw the markets take rapid fright.
The question now is where does this go? Some analysts argue that if the shutdown in the strait lasts until the end of March, we could see record oil prices above $150 a barrel.
Adnan Mazarei from the Peterson Institute for International Economics said the jump in oil prices was expected, given how production has been halted in some Gulf countries and the signs of a prolonged conflict in the region.
“People are realising that this won’t end quickly,” he said, adding that the promises of insurances and objectives laid out by the US are “becoming more unrealistic.”
The rise in oil prices could also increase the cost of important derivative products such as jet fuel and vital precursors for fertilisers.
The physical supplies from the Gulf are mainly consumed in Asia.
Already however there are signs that Asian consumers are bidding up prices for US gas, with some tankers originally heading for Europe turning around in the mid-Atlantic.
US President Donald Trump responded to the jump in prices by saying that short term rises were a “small price to pay” for removing Iran’s nuclear threat.
His energy secretary told US broadcasters on Sunday that Israel, not the US, was targeting Iran’s energy infrastructure, amid some concern about rising domestic pump prices caused by the war.
