Oil prices surge as Trump’s attack on Iran ramps up risks to supplies

SYDNEY – Oil surged when markets opened on June 23 after

the US struck Iran’s three main nuclear sites

and threatened further attacks, exacerbating a crisis in the Middle East and stoking concerns that energy supplies from the region could be disrupted.

Global benchmark Brent rallied as much as 5.7 per cent to US$81.40 a barrel, before paring some of that gain to be up 2.5 per cent at US$78.93 a barrel as at 9.17am. US West Texas Intermediate crude advanced 2.6 per cent to US$75.73.

The Middle East accounts for about a third of global crude output, and higher, sustained prices will boost inflationary pressures.

In a weekend address, US President Donald Trump said

air attacks had “obliterated” a trio of targets

and threatened more military action if Iran did not make peace. In its initial reply, Tehran warned the strikes would trigger “everlasting consequences”.

The US assault – which targeted sites at Fordow, Natanz and Isfahan – dramatically raises the stakes in the confrontation and increases the premium that traders are pricing into the global energy market. Still, the extent of the gains will hinge on how Tehran opts to respond to the US moves.

The global oil market has been gripped by the crisis since Israel attacked Iran more than a week ago, with futures pushing higher, options volumes spiking along with freight rates, and the futures curve shifting to reflect tensions about tighter near-term supplies.

“The market will closely watch Iran’s response – particularly whether it will move to disrupt Middle Eastern oil flows, directly or indirectly through its regional proxies,” said Ms Xu Muyu, a senior crude analyst at Kpler.  

“If Iran blocks the Strait of Hormuz, even for one day, oil can temporarily hit US$120 or even US$150 a barrel,” she said. “And if it attacks major oil production or export facilities in neighbouring countries, it may drive up prices higher for longer.”

Goldman Sachs analysts said that if oil flows through the Strait of Hormuz were to drop by half for a month, and remained 10 per cent lower for another 11 months, Brent would spike briefly to as much as US$110 a barrel.

Optimists were hoping Iran might back down, now that its nuclear ambitions had been curtailed, or even that regime change might bring a less hostile government to power there.

Analysts at JPMorgan, however, cautioned that past episodes of regime change in the region typically resulted in oil prices spiking by as much as 76 per cent and averaging a 30 per cent rise over time.

There are multiple, overlapping risks for physical crude flows. The biggest centres on the Strait of Hormuz, should Tehran

seek to retaliate by attempting to close the choke point

. About a fifth of the world’s crude output passes through the waterway – only about 33 km wide at its narrowest point – at the entrance to the Persian Gulf.

Iran’s Parliament has called for the closure of the strait, according to state-run TV. Such a move, however, cannot proceed without the explicit approval of Iran’s Supreme Leader, Ayatollah Ali Khamenei.

Rival suppliers

In addition, Tehran could opt to target crude infrastructure in rival suppliers in the Middle East, such as fellow producers in the Organisation of Petroleum Exporting Countries, including Saudi Arabia, Iraq or the United Arab Emirates. After the US attack, both Riyadh and Baghdad expressed concern about the targeting of the nuclear facilities.

Elsewhere, Tehran could orchestrate attacks on ships on the other side of the Arabian Peninsula in the Red Sea, encouraging Yemen-based Houthi rebels to harass vessels. After the US attacks, the group threatened retaliation.

If the hostilities escalate, Tehran’s own oil-producing capabilities could be targeted, including the key export hub on Kharg Island. Such a move, however, could send crude prices soaring, an outcome that America might want to avoid. So far, Kharg has been spared, with satellite imagery pointing to a drive by Iran to expedite its exports of oil.

The crisis will also throw a spotlight onto Opec, and its allies including Russia. In recent months, Opec+ has been relaxing supply curbs at a rapid clip seeking to regain market share, and yet members still have substantial idled capacity that can be reactivated.

Among the wider market fallout, fuels also strengthened on June 23. Diesel futures gained as much as 7.8 per cent to hit the highest price since July 2024, outpacing the move in crude. BLOOMBERG, REUTERS