Oil surges above $90 as Iran conflict threatens Strait of Hormuz

Brent crude topped $91 a barrel for the first time since June as the US-Iran conflict escalated and Tehran closed the Strait of Hormuz.

Brent crude surged past $91 a barrel Monday, the highest since mid-June, after the US launched its eighth consecutive night of strikes on Iran and Tehran declared the Strait of Hormuz closed to unauthorized vessels.

"The Strait of Hormuz closure is the most significant supply-side shock since the 2019 Abqaiq attacks, removing roughly 20 million barrels per day of transit capacity from the market," said Helima Croft, head of commodity strategy at RBC Capital Markets.

Brent jumped over 3% to trade above $91, adding to last week's 16% surge, while WTI crude gained nearly 3% to above $84 a barrel. The escalation included Iranian attacks on a Kuwait oil facility that caused multiple injuries and material damage, according to Kuwait Petroleum. Iran's navy struck four unidentified ships attempting an unsafe route through the Strait of Hormuz, stopping two and turning back the others. The US also hit Iran's Darkhovin nuclear site in Khuzestan province, according to the Iranian nuclear agency, while US forces struck Qeshm Island and southern cities including Shadegan, Sirik and Hajiabad.

The crisis threatens to reignite inflation just as the Federal Reserve weighs the timing of rate cuts. The US national average gasoline price stood just below $4 a gallon Sunday and is likely to rise above that level Monday, according to AAA. Analysts warn that the shock absorbers that prevented larger price spikes earlier in the crisis — including coordinated releases from the US Strategic Petroleum Reserve and ample commercial stockpiles — are eroding, while Russia's ban on diesel exports following Ukrainian drone attacks on refineries adds further pressure on refined product markets.

Iran Suspends Islamabad Agreement as Khamenei Warns of Retaliation

Iran's Supreme Leader Mojtaba Khamenei on Saturday accused President Donald Trump of violating the US-Iran agreement and announced the suspension of the Islamabad MoU, calling Trump's signatures "utterly worthless and devoid of credibility." Trump responded that he "couldn't care less" about Khamenei's comments. The last time US-Iran tensions escalated to this level, in January 2020 after the killing of Qasem Soleimani, Brent crude spiked to $71 before retreating within two weeks as diplomatic channels remained open. This time, the closure of the Strait of Hormuz represents a far more direct supply threat.

Cross-Asset Fallout Spreads to Equities and Crypto

The oil price surge is rippling across global markets, stoking fears that energy-driven inflation could force the Fed to delay or reduce the pace of rate cuts. The S&P 500 futures traded flat Monday as investors weighed the inflation implications, while Bitcoin faced additional headwinds as markets priced in a higher-for-longer rate environment. The geopolitical risk premium is expected to increase significantly across energy, transportation and defense sectors.

This article is for informational purposes only and does not constitute investment advice.