Oil Prices Swing Amid Middle East Tensions and US-Iran Threats

Oil prices fluctuated on Monday as markets reacted to heightened US-Iran tensions and the temporary release of millions of barrels of Iranian crude after Washington eased sanctions. Brent crude futures rose 65 cents to $112.84 a barrel by 7:46 a.m. Saudi time, while US West Texas Intermediate (WTI) climbed 84 cents to $98.75 a barrel. Earlier in the session, both benchmarks had fallen by more than $1. The spread between Brent and WTI, exceeding $13 a barrel, is the widest in years.

Analysts said that short-term oil sentiment will be influenced by threats and rhetoric, but longer-term trends will depend on Middle East oil flows. Vandana Hari, founder of oil market analysis firm Vanda Insights, noted that disruptions in regional production and shipping will continue to drive prices.

The crisis escalated over the weekend after US President Donald Trump warned Iran that the United States would “obliterate” its power plants if the Strait of Hormuz was not fully reopened within 48 hours. The remarks came just a day after Trump suggested the conflict, now in its fourth week, could be winding down.

Iran responded firmly. Parliament Speaker Mohammad Baqer Qalibaf warned on X that attacks on energy facilities in the region could cause “irreversible” damage. Analysts say such exchanges are likely to further push oil prices upward. Amrita Sen, founder of Energy Aspects, said Trump’s approach risks escalating the conflict and could result in widespread damage to Gulf energy infrastructure.

The International Energy Agency’s Executive Director, Fatih Birol, described the crisis as “very severe,” exceeding the combined impact of the oil shocks of the 1970s. Major energy facilities have been damaged, and shipping through the Strait of Hormuz, which carries roughly 20 percent of global oil and liquefied natural gas flows, has nearly stopped. Analysts estimate that 7 million to 10 million barrels per day of Middle Eastern oil production have been disrupted.

Iraq has declared force majeure on all oilfields operated by foreign companies, and production at Basra Oil Co. has dropped to 900,000 barrels per day from 3.3 million, according to Iraqi Oil Minister Hayan Abdel-Ghani. Meanwhile, Indian refiners plan to resume imports of Iranian oil, and other Asian refiners are considering similar moves.

Hari said that while US threats target Iran’s energy infrastructure, the effectiveness of such measures is uncertain as long as Iran retains the capacity to carry out retaliatory attacks. Markets remain on edge, with traders watching both geopolitical developments and the reopening of shipping lanes as key factors shaping oil prices in the coming weeks.

The combination of sanctions relief, production disruptions, and military threats has created a volatile environment for energy markets, underscoring the strategic importance of the Strait of Hormuz to global oil supply.