Key drivers behind the oil price surge include Israel's expansion of military operations in Lebanon and the ongoing impasse in US-Iran negotiations.
Despite a ceasefire announced in April, hostilities have continued to escalate.
Goldman Sachs has warned of dual risks: supply disruptions and weakening demand.
On May 31, 2026, the Israeli flag was seen flying over the medieval Beaufort Castle in southern Lebanon. Israel's Defense Minister announced that forces had captured the historic fortress, marking an expansion of military action against the Iran-backed Hezbollah group.
International oil prices rose on Monday, driven by renewed US-Iran strikes and Israel's order for a deeper incursion into Lebanon. Market concerns are mounting that an escalation of conflict with Hezbollah could undermine the fragile ceasefire between the US and Iran.
As of 10:10 AM London time (5:10 AM ET), the international benchmark Brent crude futures were up 3.5% at $94.33 per barrel. US West Texas Intermediate (WTI) crude futures climbed 4% to $90.91 per barrel.
Last week, both Brent and WTI posted their worst weekly performance since mid-April, falling 11.1% and 9.6%, respectively. However, since the US-Israel joint military action against Iran began on February 28, the two crude benchmarks have still gained approximately 30%.
Following US-mediated Israel-Lebanon talks in Washington on Friday, subsequent escalations have dampened market expectations for an imminent extension of the US-Iran ceasefire agreement.
Israeli Prime Minister welcomed the capture of Beaufort Castle, calling it a "decisive turning point" against Hezbollah's ground operations. The latest escalation was strongly condemned by officials from several European nations.
On Monday, the US President stated on social media that Iran "sincerely wants a deal" and insisted any agreement would benefit the US and its allies.
Over the weekend, the US and Iran resumed airstrikes, each claiming to have hit military targets near the Strait of Hormuz. This critical waterway handles about 20% of global seaborne oil shipments.
In recent weeks, negotiations to end the Iran conflict have made little progress, with an unstable ceasefire in place since early April.
The uncertainty surrounding a final deal persists.
A report on Saturday indicated that the US President demanded multiple changes to the latest terms negotiated by his envoys with Iranian officials. The core demands reportedly revolve around key issues such as Iran's nuclear materials. This report could not be independently verified.
The head of geopolitics analysis at energy consultancy Rystad Energy noted that oil traders are currently pricing in an expectation of a deal in the coming weeks. However, he warned that if peace talks collapse, oil prices could surge to $180 per barrel by August.
He stated in a television interview: "If no deal is reached and war resumes, we could see $180 per barrel in August, triggering a severe global recession, particularly impacting Europe and emerging Asia."
He added: "The alternative scenario is a sudden US-Iran agreement on all issues, including nuclear matters and Strait of Hormuz navigation. In that case, oil prices could quickly fall back to around $70 per barrel by year-end."
On May 7, 2026, the crude oil tanker 'Sea Voyager' was anchored off the Port of Long Beach, California. The near-closure of the Strait of Hormuz has triggered a global fuel crisis, forcing consumers to bear the brunt of soaring prices.
Goldman Sachs stated that its price forecasts for Q4 2026—$90 per barrel for Brent and $83 for WTI—face "two-way risks." The bank cautioned that persistent Middle East supply disruptions could push prices higher, while weak demand presents significant downside pressure.
Goldman's analysis suggests that weak April retail fuel sales data from China and Western Europe implies a downside risk of approximately 2 million barrels per day to its already-reduced demand forecasts.
Comments