Oil prices gave back some of their earlier gains after Iran stated it had concluded its military actions targeting Israel. This announcement has eased market concerns that the latest exchange of fire could derail regional ceasefire efforts and the process of reopening the Strait of Hormuz.
Brent crude rose 1.8% to $94.74 per barrel, while West Texas Intermediate increased 1.5% to $91.85 per barrel. Earlier in the session, both benchmarks had surged by more than 4.5%. Both crude grades have gained over 60% this year, though they remain well below their March levels, when Brent traded around $120 per barrel.
The hostilities over the weekend and into Monday marked the first direct strikes between Israel and Iran since a U.S.-brokered ceasefire took effect in April. Following the exchange, former U.S. President Trump posted on his social media platform, calling for an immediate end to the "shooting" and hinting that both sides were seeking an instant ceasefire agreement.
Market observers note that this latest escalation further complicates the path to a broader regional peace deal. Efforts to reach a memorandum of understanding with Iran to reopen the Strait of Hormuz remain stalled, entangled with issues related to Iran's nuclear program and demands regarding access to frozen funds.
Analysts at Saxo Bank commented, "A durable peace agreement appears increasingly elusive. The near-closure of the Strait of Hormuz continues to tighten the global energy market, with several oil majors warning that the window before physical shortages emerge could be a matter of weeks, not months."
Despite severe export disruptions in the Persian Gulf and ongoing global supply tightening, Saudi Arabia, the world's largest oil exporter, reduced the price of its flagship crude for Asian buyers by $6 per barrel. The new pricing sets it at a $9.50 premium to the regional benchmark. Saudi pricing is closely watched as a gauge of regional demand. This price cut coincides with a significant reduction in China's crude imports, driven by weaker refining activity and declining exports of refined products.
Saudi Arabia and other members of the OPEC+ alliance agreed on Sunday to increase oil production again in July, marking a fourth consecutive month of planned output hikes. However, the market widely views this move as symbolic, given that ongoing conflict in the Middle East continues to disrupt shipping through the Strait of Hormuz, and Russia's energy infrastructure has suffered substantial damage.
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