Oil markets jolted sharply higher on Monday after President Donald Trump publicly dismissed any prospect of a near-term peace deal with Iran, sending Brent crude above $105 per barrel and West Texas Intermediate to $100.20 — a gain of nearly 5% in a single session. Traders had briefly hoped that diplomatic back-channels were reopening, but Trump's blunt rejection shattered that optimism and drove energy markets to their highest levels since the conflict began.
The Strait of Hormuz has now been closed for ten consecutive weeks, making this the longest sustained disruption to the world's most critical oil chokepoint in modern energy history. Roughly 20% of all global oil trade — approximately 21 million barrels per day — normally passes through the narrow waterway between Iran and Oman. With that corridor shut, tankers carrying Gulf crude are forced onto far longer routes around the Cape of Good Hope, adding weeks to delivery times and hundreds of dollars per cargo in additional freight costs.
Since February 28, when hostilities intensified and the strait effectively closed, oil prices have surged by more than 40%. The world has collectively lost access to over one billion barrels of supply since the war began — a shortfall that is now translating into acute pain at petrol stations and in industrial supply chains. Motorists in the United States are paying an average of $1.12 more per gallon than they did one year ago, with prices in some coastal states approaching record territory.
Saudi Aramco, the world's largest oil producer, issued a stark warning on Sunday that the disruption may not be resolved before the end of the year. The company's CEO told investors that Aramco has ramped up production to near-maximum capacity, but alternative supply routes and spare capacity elsewhere cannot fully offset the volume ordinarily flowing through Hormuz. Analysts at Goldman Sachs now project Brent could test $115 if the strait remains closed through summer.
The disruption extends well beyond crude oil. Qatar, the world's largest exporter of liquefied natural gas, has seen its LNG shipments severely disrupted as tankers avoid the Gulf region. European buyers who pivoted to Qatari LNG following the 2022 Russian gas cutoff are now scrambling once again for supply, pushing European natural gas futures sharply higher. Petrochemical producers and fertilizer manufacturers across Asia and Europe are reporting surging feedstock costs, with downstream effects on food prices already becoming visible in several markets.
In a notable divergence, equity markets appear broadly unconcerned. The S&P 500 and the Nasdaq Composite both remain near all-time highs, buoyed by strong corporate earnings and continued enthusiasm for artificial intelligence. Semiconductor stocks led Monday's gains: Micron Technology rose 5% on the back of robust data-centre demand forecasts, while Nvidia added 3% after analysts raised price targets ahead of its next earnings release. Investors seem to be betting that the technology-driven growth story can withstand elevated energy costs, at least in the near term.
Energy analysts warn, however, that the equity market's complacency may prove short-lived. Persistently high oil prices act as a tax on consumers and businesses alike, compressing margins across manufacturing, logistics, and agriculture. If Brent remains above $100 for another quarter, economists estimate the drag on global GDP growth could reach half a percentage point — a threshold that historically has begun to unsettle equity valuations. All eyes now turn to emergency meetings of the International Energy Agency and OPEC-plus scheduled for later this week.
Comments