Oil Prices Set for Further Gains as Gulf Conflict Disrupts Global Supply

Oil prices are expected to rise further when markets reopen on Monday as the conflict involving the United States, Israel and Iran enters its third week, raising fears of one of the largest global supply disruptions in years.

Benchmark crude prices have already surged more than 40 percent this month. Brent Crude and West Texas Intermediate climbed to their highest levels since 2022 after Iranian authorities halted commercial shipping through the Strait of Hormuz. The strait normally carries about one-fifth of the world’s oil supply.

Analysts say prices could remain above $100 per barrel if the disruption continues. Rising energy costs are expected to put pressure on global economies by increasing transportation and production expenses while reducing consumers’ real incomes.

The latest escalation follows US strikes on military targets near Kharg Island, the country’s primary oil export hub. Iranian drone attacks on a major oil terminal in the United Arab Emirates have also intensified concerns about energy infrastructure security in the Gulf.

According to research by JPMorgan Chase, the conflict could create a global oil supply shortfall of about seven million barrels per day. The bank noted that such a gap could only be balanced by a similar drop in global consumption.

So far, the decline in demand has been limited. JPMorgan estimates that reduced air travel in the Middle East has cut oil demand by around 400,000 barrels per day, but global consumption has otherwise remained largely stable.

The bank warned that Kharg Island is central to Iran’s oil industry and plays a major role in government revenues. Storage capacity on the island is estimated at around 30 million barrels, with roughly 18 million barrels currently stored there. Analysts say that if the facility were taken offline, Iran’s oil production could fall sharply because of limited export alternatives.

Cargoes that departed the Gulf before shipping halted are still reaching their destinations. However, new shipments have largely stopped, raising concerns that supplies to Asia could run out by the end of this week, while Europe may face shortages soon after.

Research firm Rystad Energy said the conflict has already forced more than 12 million barrels of oil equivalent per day of Middle Eastern energy production offline. Iraq has been among the hardest hit, with more than 60 percent of its pre-conflict output disrupted.

In a worst-case scenario, the firm estimates regional oil production could fall by as much as 70 percent if the conflict drags on and storage facilities fill up.

Economists warn that higher oil prices could slow global growth. Analysts at Oxford Economics said crude prices above $100 per barrel would significantly reduce household purchasing power and weigh on consumer spending.

Tensions remain high across the region. South Korea said it would review a request by US President Donald Trump for allied countries to send warships to help secure shipping through the Strait of Hormuz.

Meanwhile, oil loading operations in the UAE’s Fujairah port resumed after a drone attack and fire disrupted activities over the weekend, highlighting the continuing risks facing global energy supply chains as the conflict continues.