Oil prices, Trump strike on Iran:
Oil prices surged on Monday to their highest levels since January, following a dramatic escalation in Middle East tensions after the United States joined Israel in striking Iran’s nuclear facilities over the weekend. The move triggered fresh fears over global oil supply disruptions, particularly in the critical Strait of Hormuz.
As of 0806 GMT, Brent crude futures were trading at $77.73 per barrel, up 72 cents or 0.93 per cent, while US West Texas Intermediate (WTI) climbed 71 cents or 0.96 per cent to $74.55. Both contracts had jumped by more than 3 per cent earlier in the session, briefly touching $81.40 and $78.40, respectively — their highest levels in nearly five months — before paring gains.
The price spike came in response to US President Donald Trump’s announcement that American forces had “obliterated” Iran’s main nuclear sites, marking a significant escalation in the conflict. Tehran swiftly vowed retaliation and declared that the U.S. attack had broadened the scope of “legitimate targets” for Iranian forces. Iran also branded Trump a “gambler” for joining Israel’s offensive.
Iran, the third-largest oil producer within OPEC, plays a pivotal role in global energy supply. Market watchers now fear that any Iranian retaliation may involve a blockade of the Strait of Hormuz, a strategic chokepoint through which nearly 20 per cent of the world’s oil flows daily. Although some alternative export routes exist via pipelines, experts warn that a complete closure would still choke off significant volumes of oil, disrupt shipping routes, and likely spike freight rates.
According to Goldman Sachs, a temporary halving of oil flows through the Strait for one month could push Brent crude to as high as $110 per barrel, although the bank currently assumes no large-scale or sustained disruption. “Incentives remain high across major global stakeholders to avoid prolonged interruptions,” the report noted. Since the conflict began on June 13, Brent has rallied over 13 per cent, while WTI is up around 10 per cent.
However, analysts also caution that any closure of the Strait would be a double-edged sword. While it would severely affect global supply, it would also cripple Iran’s own oil exports, which are essential to its national revenue. A prolonged standoff would therefore carry heavy economic costs for Tehran itself.
In response to the unfolding situation, Japan urged all parties to de-escalate, while South Korea raised concerns about the impact of rising oil prices on its trade and economy. Meanwhile, Russian President Vladimir Putin was expected to meet with Iranian Foreign Minister Abbas Araqchi in Moscow, according to Russian news agency Interfax.
Is India threatened?
Despite mounting instability following the US strikes on Iranian nuclear sites, the Indian government is not pressing the panic button over oil prices or inflation. Officials highlight India’s growing reliance on Russian crude oil, a by-product of post-Ukraine war realignments, as a strategic asset amid fears of disruption through the Strait of Hormuz.
The narrow waterway, crucial for nearly 20 per cent of global oil shipments and most West Asian crude exports, faces fresh threats after Iran hinted at retaliatory action. Yet, New Delhi believes it has enough fallback options. A senior official noted, “India imported more oil from Russia this month than from all West Asian nations combined,” adding that this diversification should insulate the country against severe crude shortages even if Iran attempts a partial blockade of the strait.
Global economy and market reaction amid Iran-Israel war
Economists are warning that a dramatic oil price shock could deliver a fresh blow to a global economy already struggling with high interest rates and geopolitical instability. According to Oxford Economics, in a worst-case scenario where oil spikes to $130 per barrel, U.S. inflation could reach 6 per cent by year-end, further complicating monetary policy decisions.
Still, historical data suggests that equity markets may eventually look past the initial shock. In previous Middle East conflicts, such as the 2003 Iraq war and the 2019 attacks on Saudi oil infrastructure, the S&P 500 index fell modestly—down 0.3 per cent on average over the first three weeks—but rebounded 2.3 per cent over the subsequent two months, according to Wedbush Securities and CapIQ Pro.
What’s happening with Dollar?
The heightened geopolitical risk is also prompting renewed focus on the U.S. dollar, which has already weakened this year amid concerns over declining U.S. exceptionalism. Analysts suggest the greenback could receive a short-term boost from a flight-to-safety bid if U.S. military involvement deepens. However, the longer-term impact remains uncertain and will depend on the scope of escalation and its broader economic consequences.
As tensions continue to rise, markets are bracing for volatility in commodities, currencies, and equities, with investors closely watching developments in Tehran, Washington, and Tel Aviv — and particularly, the waters of the Strait of Hormuz.
