Oil prices have surged past $100 a barrel for the first time in over three years as conflict in West Asia disrupts shipping through the Strait of Hormuz, damages key refineries, and forces production cuts. Markets have also been shaken by panic buying and shipping delays.
Oil climbs past $100 as Hormuz tensions choke global supply
Global oil prices have shot past the $100 a barrel mark for the first time since 2022, as the ongoing conflict in the Middle East continues to shake energy markets and disrupt oil supply.
The jump comes as the war involving the United States, Israel and Iran begins to affect one of the world’s most important oil routes. Before the conflict escalated, Brent crude was trading at around $81 a barrel. It has now climbed to roughly $101.19, an increase of about 25 percent.
Oil prices surge past $100- Fears oil could reach $150
Brent crude, the global benchmark for oil, climbed 16.6% to $108.10 a barrel when trading opened for the week in Asia-Pacific markets. It is the first time prices have crossed the $100 level since Russia invaded Ukraine in 2022.
The US benchmark, West Texas Intermediate (WTI), also surged. It jumped 19.6% to $108.72 a barrel. Pre-market trading data also signalled a weak start for Wall Street, with markets expected to open lower on Monday.
Oil prices had briefly dipped on Friday morning but began rising again later in the day. In an interview with the Financial Times, Saad al-Kaabi, the energy minister of Qatar, warned that the war could push oil prices even higher. He said if the conflict continues and Gulf countries are forced to halt production entirely, crude prices could surge to as much as $150 per barrel.
Oil had already been rising in recent months. Prices have now jumped by about two-thirds from just above $60 a barrel at the start of the year. The rally picked up pace after the US-Israeli attack on Iran a little over a week ago, which disrupted shipping through the Strait of Hormuz — a crucial route for Middle Eastern oil.
Here is why the pumps are feeling the pressure:
Gulf producers begin cutting output: Supply shock hits global oil market
The sharp rise in oil prices comes amid production cuts announced by several oil-producing countries in the Gulf. Kuwait, the fifth-largest producer in the OPEC+ group (Organisation of the Petroleum Exporting Countries), said on Saturday that it would reduce production as a precaution. Officials pointed to “Iranian threats against the passage of ships through the Strait of Hormuz.”
Oil production in Iraq has also taken a major hit. According to industry officials cited by Reuters, production from Iraq’s three major southern oilfields has dropped by about 70%. Output from those fields has fallen to roughly 1.3 million barrels per day. Before the war began, the same fields were producing around 4.3 million barrels per day.
The United Arab Emirates, the third-largest oil producer in OPEC, said it is carefully adjusting offshore production levels as storage facilities begin to fill up, according to CNBC.
Strait of Hormuz crisis deepens
The situation has worsened because shipping through the Strait of Hormuz, a narrow waterway that carries about a fifth of the world’s oil and liquefied natural gas, has been severely disrupted. Traffic through the world’s most vital oil chokepoint has plummeted by 70–80%.
Approximately 20 million barrels of oil per day (roughly 20% of global consumption) are currently stranded in the Persian Gulf as shipping companies and insurers refuse to risk the passage.
Hundreds of oil tankers trying to pass through the strait have stopped moving after Iran’s Revolutionary Guards warned they would “set ablaze” any vessel using the route.
At the same time, storage facilities in Saudi Arabia, the United Arab Emirates and Kuwait are nearing capacity. If oil cannot be shipped out through the strait, major oilfields could soon be forced to shut down.
Major oil refineries hit as strikes spread across region
Over the past nine days, several key oil facilities across the Middle East have come under attack, adding to fears that the conflict could disrupt global energy supplies. A series of drone and missile strikes has targeted some of the region’s biggest oil processing site.
In Iran, joint air strikes by the United States and Israel targeted several major facilities as part of an operation known as Operation Epic Fury. The strikes hit five major oil installations around Tehran, including the Tehran Refinery and the Shahran Oil Depot.
At the same time, Iran is reported to have launched drone attacks on major energy sites across the Gulf. In Saudi Arabia, the Ras Tanura Oil Terminalm one of the largest oil export terminals in the world, was struck.
Energy infrastructure in Bahrain also came under attack. The Bapco Refinery was among the sites hit during the strikes. These facilities play an important role in storing and processing fuel supplies for the country.
Financial markets make the surge worse
The jump in oil prices has also been driven by market panic. On Friday, March 6, WTI crude surged by about $12 within just nine hours. The sudden spike happened partly because several hedge funds had bet that oil prices would remain low. As the conflict escalated and prices rose, those traders were forced to buy back oil contracts at much higher prices to limit their losses.
The rapid buying created a chain reaction in the market, pushing prices up even faster.
Shipping routes thrown into chaos
Many tankers that would normally pass through the Gulf and then the Suez Canal are now being rerouted around the Cape of Good Hope at the southern tip of Africa. This detour adds several weeks to delivery times and increases shipping costs. Meanwhile, major shipping companies have also introduced “war risk surcharges”, extra fees that cover the danger of operating in conflict zones. These additional costs are now being passed along the supply chain.
Trump calls price spike a ‘small price to pay’
On the other hand, US President Donald Trump dismissed concerns over the surge in energy prices, saying the spike was temporary and worth it. “The extraordinary spike in oil prices is a very small price to pay for U.S.A., and World, Safety and Peace,” Trump wrote on social media on Sunday.
He described the rise as a short-term consequence of the war on Iran and added that prices would fall once the threat from Iran’s nuclear programme was eliminated.
The White House has floated several ideas to deal with the supply disruption. These include sending Saudi oil through the Red Sea instead of the Strait of Hormuz, tapping emergency US oil reserves and offering government-backed insurance to shipping companies.
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