Oil prices jump over 2% after US strike on Larak island
Oil prices moved higher as investors reacted to a fresh escalation between the United States and Iran. The latest military action increased concerns that the conflict could further disrupt energy supplies from the Middle East.
Brent crude futures rose $2.51, or 2.85%, to $90.61 a barrel during early trading. US West Texas Intermediate crude also gained $2.13, or 2.55%, to reach $85.53 a barrel.
The increase came after US forces attacked two launchers on Iran’s Larak island in the Strait of Hormuz. The strike was reported as the first known American attack on the Gulf nation since late July.
The development quickly raised concerns in global energy markets. Traders are closely watching the situation because any major disruption around the Strait of Hormuz could affect oil supplies and prices worldwide.
US strike brings fresh market pressure
Iran responded to the US action by attacking two American air bases in Jordan, according to Iranian media reports citing the Islamic Revolutionary Guard Corps.
The exchange of attacks has added another layer of uncertainty to a conflict that has already continued for several months. Investors are now assessing whether the latest developments could lead to a longer period of military escalation.
IG market analyst Tony Sycamore said the situation appeared to be entering another escalation phase. He noted that it remained difficult to predict whether the latest tensions would last for days or weeks.
The uncertainty has made oil traders particularly sensitive to developments around the Strait of Hormuz. The waterway is one of the most important routes for global energy shipments.
Before the war began at the end of February, around one-fifth of the world’s oil supply moved through the Strait of Hormuz. Any serious interruption could therefore have a major effect on international energy markets.
Negotiations aimed at ending the conflict remain stalled. At the same time, mediators are working to reopen the strategic waterway and restore more normal shipping activity.
Oil supply fears remain at the centre
ANZ analysts said concerns about supply disruptions had remained under control because oil flows through the Strait of Hormuz had continued to increase.
However, shipping activity over the weekend showed signs of growing caution. Shipping data indicated that the number of visible commodity vessels passing through the waterway fell to about five a day.
The lower traffic suggested that shipping companies were becoming more careful because of the risk of attacks. Any further reduction in tanker movements could increase pressure on oil markets.
The United Kingdom Maritime Trade Operations also reported that a tanker was hit by a projectile while travelling inbound through the strait on Saturday.
The incident added to concerns among shipping companies and energy traders. Continued attacks on vessels could make insurers, ship operators and energy firms more reluctant to use the route.
For oil markets, the key issue is whether the disruption remains temporary or develops into a wider supply problem. So far, continued flows have helped prevent a much stronger price reaction.
Technical levels could decide the next move
Market analysts are also watching important technical price levels for clues about where oil could move next.
Sycamore said that if the conflict pushed WTI crude above resistance around $85.80 to $85.90 a barrel, prices could move higher.
According to his assessment, the next possible target would be last week’s high of $87.69. A further rise could take prices towards the July high of $93.50.
These levels are important because a sustained move above resistance can encourage additional buying by traders. However, prices could also reverse if tensions ease or oil supplies continue moving through the strait.
The latest rise comes after oil prices declined last week. Brent and WTI were both expected to record small monthly declines in August despite Monday’s sharp increase.
Brent and WTI had fallen more than 4% last week, marking their first weekly decline in three weeks. This shows how quickly oil markets have been changing in response to military developments and supply expectations.
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New sanctions add another risk
The United States is also considering additional economic pressure on Iran. US Treasury Secretary Scott Bessent told Reuters that Washington was likely to announce new secondary sanctions against Iran every week.
The stated aim is to isolate Iran from the dollar-based financial system further. Such measures could create additional pressure on Iran’s economy and potentially affect its ability to sell and transport energy.
For international markets, the impact will depend on how Iran responds and whether the measures affect oil exports. Traders will continue monitoring both sanctions and military developments for signs of further disruption.
The situation also creates uncertainty for countries that depend heavily on imported energy. Higher crude prices can increase fuel costs, transportation expenses and inflationary pressure in many economies.
