Oil prices surged on Monday after unprecedented joint US and Israeli strikes on Iran sharply escalated tensions across the Middle East, raising concerns about potential disruptions to global energy supply.
The coordinated attacks late Friday targeted senior Iranian military and political leadership. Iranian state media confirmed Supreme Leader Ayatollah Ali Khamenei was killed along with other senior officials. Tehran has since retaliated with missile strikes on US-linked sites and across Israel, while airspace closures and shipping disruptions have spread across the Gulf.
Markets quickly turned their focus to the Strait of Hormuz — the narrow waterway that carries roughly one-fifth of global oil shipments.
Oil spikes to eight-month high
WTI crude futures jumped as much as 10% to above US$75 a barrel — the highest level in eight months — before easing to trade more than 8% higher in a volatile session.
The move reflects mounting concern over supply flows through Hormuz. While Iranian officials have insisted the strait remains open, commercial shipping activity has slowed sharply, with vessels reportedly rerouting away from the passage amid heightened security risks.
Iran has also launched retaliatory strikes on US assets across neighbouring states including the United Arab Emirates, Bahrain, Kuwait, Qatar, Saudi Arabia, Jordan, Iraq and Syria, intensifying fears of broader regional instability.
With 15–20 million barrels of crude passing through daily — alongside substantial LNG volumes — the Strait of Hormuz remains one of the most strategically sensitive corridors in global energy markets.
In a potential offset, OPEC+ agreed on Sunday to increase output by 206,000 barrels per day from April. The additional supply reportedly equates to less than 0.2% of global demand, limiting its immediate capacity to absorb a major disruption.
Energy stocks jump on open
The surge in crude prices sent energy stocks sharply higher at the open.
The S&P/ASX 200 Energy index climbed more than 10% in early trade before trimming gains to around 3–4% by early afternoon as oil prices moderated from their highs.
Woodside Energy Group Ltd (ASX:WDS, LSE:WDS, OTC:WOPEF) and Santos Ltd (ASX:STO) were among the strongest performers in early trading, each up nearly 5% by 1 pm AEDT, while fuel retailers Ampol (up about 2.2%) and Viva Energy (+2.8%) also advanced.
Broader markets were more subdued. The ASX 200 was modestly lower by midday after recovering from earlier session lows, with financials and technology stocks under pressure amid the risk-off backdrop. Defence and gold stocks attracted buying interest.
Risk premium returns
Oil’s rebound comes after a period in which prices had been drifting lower on expectations of ample supply and moderating demand growth. Before the weekend strikes, Brent had been trading below its five-year average, despite being up more than 20% since early January.
Analysts are now discussing scenarios that could push oil towards US$90 or even US$100 a barrel if Hormuz traffic remains constrained. Others argue that unless there is a sustained, physical interruption of flows, the spike may prove temporary — as seen in previous regional flare-ups where initial gains faded within days.
Broader market reaction
Beyond energy, haven assets strengthened. Gold prices rose, government bond yields eased, and the US dollar firmed, while the Australian dollar came under pressure.
Air travel and logistics across the region have also been disrupted. Emirates suspended flights indefinitely, while Etihad and Qatar Airways extended cancellations. Several Gulf airports were reportedly struck during retaliatory exchanges.
Shipping companies have begun rerouting vessels away from Hormuz, and insurers have increased war-risk assessments for tankers operating in the region, adding to costs and uncertainty across global supply chains.
Markets are now closely watching whether commercial traffic through the strait stabilises in coming days. With up to a fifth of global oil flows moving through the corridor, even a temporary disruption has the potential to keep crude prices elevated.
For now, the trajectory of oil — and the broader market reaction — hinges on whether the conflict escalates further or energy shipments resume without sustained interruption.