International oil prices surged by as much as 3.3% during trading after the United States launched an attack on oil facilities at Kharg Island, a core hub for Iranian crude exports. This military action marks a significant escalation of conflict in the region. Due to ongoing hostilities, global energy consumers have faced disruptions to supplies from the area for two weeks. Following a surge of over 40% in the past two weeks, Brent crude is currently trading around $105 per barrel, while WTI crude prices are nearing $100 per barrel.
In retaliation for the US strike on military facilities at Kharg Island, the Islamic Republic of Iran launched counterstrikes against Israel and Arab nations. As a central hub for Iran's petroleum exports, Kharg Island handles the majority of the country's crude shipments. The bombing of the island has significantly widened the scale of the geopolitical conflict. A report released last week by the International Energy Agency stated that the current conflict has caused the most severe supply disruption in the history of the global oil market. The Strait of Hormuz, a strategic passage connecting the Persian Gulf to international markets, has seen shipping nearly halted since the conflict began.
Warren Patterson, Head of Commodities Strategy at ING, analyzed: "Although the attack on Kharg Island has not directly damaged oil infrastructure so far, supply-side risks continue to accumulate. Any further disruption to transportation will lead to a further tightening of market supply and demand." US President Donald Trump issued a stern warning: if Iran continues to block shipping lanes through the Strait of Hormuz, the US will take action against Iranian oil assets. In response, Iranian authorities stated that oil exports from Kharg Island are proceeding normally. Meanwhile, intelligence suggests that specific areas in Doha and Dubai hosting US forces could face attacks within the coming hours.
According to a senior aide to President Trump, the US Department of Defense assesses that the conflict with Iran, now in its third week, is expected to continue for another four to six weeks. Kevin Hassett, Director of the White House National Economic Council, emphasized while disclosing this timeline that the final decision on when the war ends remains with the President. Last weekend, Trump signaled a willingness to negotiate a resolution. However, Iranian Foreign Minister Abbas Araghchi subsequently stated clearly that the Islamic Republic currently has no intention to negotiate nor does it seek a ceasefire.
Trump has increased diplomatic pressure, publicly calling for the reopening of shipping lanes through the Strait of Hormuz and urging allies to deploy naval vessels for escort missions. According to informed sources, the US government plans to announce that several nations have agreed to form a multinational joint escort alliance, but the involved countries are still discussing the timing of the operation. The key point of contention is whether the escort mission should be deployed before hostilities end or initiated after the conflict subsides.
In the United Arab Emirates, loading operations at the critical energy hub of Fujairah Port were suspended following a drone attack last Saturday. With the Strait of Hormuz still blocked, the attack severed the UAE's only crude export route. Fortunately, port operations fully resumed last Sunday after emergency repairs. In a clear sign of war-induced pressure on global crude supplies, the International Energy Agency stated last Sunday that it would immediately release an unprecedented amount of crude from strategic reserves to Asia. Before issuing the statement, the agency had received specific implementation details for the record 400 million barrel reserve release announced last week.
"Most of the geopolitical risk premium was already priced into oil prices last week," analyzed Harris Khursheed, Chief Investment Officer at Karobaar Capital LP. "Therefore, traders are generally in a wait-and-see mode, needing clearer evidence of actual supply losses before substantially pushing prices higher." He added that following the attack on Kharg Island, "market dynamics suggest pricing is currently more focused on the risk of supply disruption rather than a full-scale supply shock."
At the time of writing, Brent crude for May delivery was up 0.58%, to $103.74 per barrel. WTI crude for May delivery was up 0.15%, to $96.99 per barrel.
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