WTI crude jumps 2.2% to $70.75 as US-Iran strikes renew supply fears

WTI crude oil jumped 2.2% to $70.75 a barrel Monday as fresh US-Iran military strikes over the weekend shattered a fragile ceasefire, reversing part of last week's 4% decline. NYMEX August gasoline futures settled at $3.0614 a gallon, while August heating oil closed at $3.3317 a gallon.

"The latest exchange shows how quickly the supply-risk premium can return to oil markets after any breakdown in diplomacy," said Jim Burkhand, vice president and head of research for oil markets at S&P Global Energy.

The rally followed a weekend escalation that began when Washington alleged Iran targeted another commercial vessel in the Strait of Hormuz. US Central Command responded with strikes on Iranian military targets Saturday, and Iran's Islamic Revolutionary Guard Corps attacked US installations in Kuwait and Bahrain. On Friday, Brent crude for August delivery settled at $71.99, down 4.34%, while WTI closed at $69.23, a 3.74% decline, as shipping through the Strait of Hormuz had begun recovering after a June 17 memorandum of understanding between the two countries.

The renewed hostilities threaten to disrupt the fragile recovery in Persian Gulf oil flows. S&P Global data showed 78 vessels transited the Strait of Hormuz on June 24, the highest daily count since the conflict began and equivalent to 57% of pre-conflict volumes. Saudi Arabia had resumed loading tankers at its Ras Tanura terminal, and Persian Gulf exports had recovered to roughly 75% of pre-war levels, according to Axis Securities. Other Middle Eastern producers, including the United Arab Emirates, Kuwait and Qatar, also boosted output despite ongoing tanker availability constraints. The question now is whether the latest escalation will reverse that progress.

Burkhand said Brent crude could remain around $70 to $75 a barrel in the near term before rising to $80 to $90 in the second half of 2026 as inventories tighten. "This means, despite the fall in prices so far in June, upward price pressure could return as inventories fall to even lower levels," he added. "Also, demand for crude oil and products to replenish inventories will be a factor later this year and in 2027."

The geopolitical risk is particularly acute for Indian refiners, who had begun to see tanker traffic resume through the Strait of Hormuz. West Asia supplied 60% to 70% of India's crude imports before the conflict but now accounts for about 30%, with Russia supplying more than half of India's oil needs at discounts of $4 to $5 a barrel to Brent, according to Mint. India's ministry of external affairs said June 23 that 11 India-bound vessels crossed the Strait since the MoU was signed, including three Indian-flagged crude oil tankers carrying more than 285,000 metric tonnes each. The list also included one foreign-flagged liquefied petroleum gas carrier and six foreign-flagged bulk carriers transporting fertilizer cargo.

The fragility of the ceasefire was highlighted by Vandana Hari, founder and chief executive of Vanda Insights, who said at a conference in Singapore on June 25 that while the recent easing in tensions may provide short-term relief, the underlying fault lines in West Asia remain unresolved, leaving the region vulnerable to renewed flare-ups.

The US has temporarily waived sanctions on Iran until Aug. 21, but the latest exchange raises questions about whether the June 17 MoU can hold. Eight vessels went "dark" during Strait of Hormuz transit on June 24, as interference with ship-tracking signals created anomalies in vessel-position data, according to S&P Global.

Indian equity markets reflected the renewed uncertainty, with the Sensex falling 372 points, or 0.48%, to 76,728 and the Nifty declining 110 points, or 0.46%, to 23,946 on Monday. Gold, a traditional safe-haven asset, traded at $4,064 an ounce on COMEX, down 0.78%, as investors weighed the geopolitical risks against a stronger dollar.

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