Oil prices surged about 20% on Monday, hitting their highest since July 2022, as the expanding U.S.-Israeli war with Iran led some major Middle Eastern oil producers to cut supplies and on fears of prolonged disruption to shipping through the Strait of Hormuz chokepoint.
Iraq and Kuwait have begun cutting oil output, adding to earlier liquefied natural gas reductions from Qatar, as the war blocked shipments from the Middle East.
Analysts predict the United Arab Emirates and Saudi Arabia will have to also cut output soon as they run out of oil storage.
The war could leave consumers and businesses worldwide facing weeks or months of higher fuel prices even if the week-old conflict ends quickly, as suppliers grapple with damaged facilities, disrupted logistics and elevated risks to shipping.
Brent crude futures rose as much as $18.35, or 19.8%, to $111.04 a barrel and were up $15.24, or 16.4%, at $107.93 as of 0014 GMT on Monday.
U.S. West Texas Intermediate (WTI) crude futures were up $16.50, or 18.2%, at $107.40 a barrel, after rising as much as $20.34, or 22.4%, to $111.24 earlier in the session.
Brent climbed 27% and WTI rose 35.6% last week, before the latest jumps.
“I think prices have rallied this morning on the reports that Middle East producers are now reducing output due to storage facilities filling up fast,” said Daniel Hynes, senior commodity strategist at ANZ.
“The next flag will be whether it eventually gets to a point where they have to start shutting in oil wells, which not only impacts output even further, it delays a response once the conflict eases as well. That would potentially sustain those prices for much longer,” Hynes added.
Iraqi oil production from its main southern oilfields has fallen by 70% to just 1.3 million barrels per day as the country is unable to export oil via the Strait of Hormuz due to the Iran war, three industry sources said on Sunday. Crude storage has reached maximum capacity, said an official with the state-run Basra Oil Company.
Kuwait Petroleum Corporation began cutting oil output on Saturday and declared force majeure on shipments, though it did not say how much production it would shut.
Iran’s attacks on oil infrastructure across the region have continued. Fujairah Media Office said fire broke out in the UAE’s Fujairah oil industry zone resulting from debris falling, with no injuries reported. Saudi Arabia’s Defence Ministry said on X it intercepted a drone heading to the Shaybah oilfield.
NEW LEADER
Iran on Monday named Mojtaba Khamenei to succeed his father Ali Khamenei as Supreme Leader, signalling that hardliners remain firmly in charge in Tehran a week into its conflict with the United States and Israel.
“With the appointment of the late leader’s son as Iran’s new leader, U.S. President Donald Trump’s goal of regime change in Iran has become more difficult,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.
“That view accelerated buying, as Iran is expected to continue its closure of the Strait of Hormuz and attacks on other oil-producing nations’ facilities, as seen last week,” he said, predicting WTI could rise to $120 and then $130 a barrel in a relatively short period.
