Oil prices rose sharply on Monday as traders reacted to a deadline set by US President Donald Trump for Iran to reopen the Strait of Hormuz or face attacks on power plants and other infrastructure. Brent futures increased 63 cents, or 0.6%, to $110.40 a barrel at 2:40 pm GMT, while US West Texas Intermediate (WTI) crude jumped $3.95, or 3.5%, to $116.36 a barrel.
Typically, WTI trades at a discount to Brent, but in this case the pattern has reversed, reflecting heightened demand for immediate supply. “What appears to be a shift in relative value is, in reality, a reflection of how aggressively the market is pricing immediacy,” Saxo Bank analyst Ole Hansen said.
The Strait of Hormuz, a narrow waterway that handles about a fifth of global oil shipments, has been effectively closed since US and Israeli attacks began on February 28. Trump warned that if Tehran does not comply with reopening the strait, “every bridge in Iran will be decimated” and “every power plant in Iran will be out of business, burning, exploding, and never to be used again.”
The conflict escalated Monday, with Iranian media reporting strikes on railway and road bridges, an airport, a petrochemical plant, and power lines. Iran rejected a US-proposed ceasefire brokered through Pakistan, insisting that only a permanent end to the war would be acceptable.
Disruptions to exports from Gulf oil producers have driven prices higher, creating a windfall for countries like Iran, Oman, and Saudi Arabia while costing other states billions of dollars, according to a Reuters analysis. The unusual WTI premium over Brent is accompanied by record-high spot premiums as Asian and European refiners scramble to replace Middle Eastern supply.
Saudi Aramco increased the official selling price of its Arab Light crude to Asia for May delivery, setting a record premium of $19.50 a barrel above the Oman/Dubai average. Meanwhile, Kazakhstan reported stable oil exports via the Black Sea, a day after Russia said Ukrainian drones struck the Caspian Pipeline Consortium terminal, which handles roughly 1.5% of global oil supply.
OPEC+ nations announced on Sunday that they would raise their May oil output quotas by 206,000 barrels per day. Analysts note, however, that the increase is largely symbolic as several key members cannot boost production due to the Strait of Hormuz closure.
The United Nations Security Council is expected to vote Monday on a resolution to protect commercial shipping in the strait. Diplomats said the measure would be significantly watered down after China, a veto-wielding member, opposed authorising the use of force.
The deadline and heightened military activity underscore the fragility of global energy markets and the extent to which the Iran war is affecting supply. Traders and refiners alike remain on high alert as the situation develops and Middle Eastern crude flows continue to face disruption.
