Oil prices have surged over 4% in early Asian trade on Monday after reports of Iranian strikes on Israel weakened market sentiment, adding to the caution over the West Asia conflict, which has now stretched for 100 days.
In international markets, the global benchmark Brent crude futures for August jumped 4.3%, quoted near the $97.33 per barrel mark, while the US contract, West Texas Intermediate futures for July, advanced 4.4%, trading near the $94.5 per barrel level.
Crude oil prices to remain elevated
The surge in crude oil prices came after Tehran fired a barrage of ballistic missiles at Tel Aviv, marking a violation of the ceasefire agreed upon in early April. This weakened market sentiment over the re-opening of the Strait of Hormuz, which remains under dual blockade.
The waterway passage transits nearly 20% of global oil and energy flows. “Expectations for normalization of the Strait of Hormuz have declined for near-term contracts but remain elevated for longer-dated ones. Crude oil prices are also range-bound for longer-dated contracts, suggesting this theme may temporarily move off the market’s radar,” said Naka Matsuzawa of Nomura Securities in a report.
Trump asks Netanyahu not to retaliate
Markets remain sceptical about the de-escalation of tension in the Middle East as US President Donald Trump has asked Israel’s Prime Minister Benjamin Netanyahu not to retaliate against Iran’s recent missile attack, US media agency Axios reported, citing officials familiar with the matter.
In a phone interview with the Financial Times, Trump said Netanyahu will have to accept whatever agreement Washington reaches with Tehran, adding that the final decision will be taken by the US administration.
“He won’t have any choice,” Trump said in a phone interview with the Financial Times. Making his position even clearer, Trump added: “I call the shots. I call all the shots. He doesn’t call the shots.”
OPEC+ output increased
Amid the supply disruptions, OPEC+ has agreed to increase supply quotas by 188,000 from July onwards, marking its fourth consecutive increase since the closure of the Hormuz Strait.
However, analysts cited by Reuters have said that the hike would have little impact on the global disruptions, as most members of the organisation have not been able to meet their supply targets because of the closure of the waterway passage and Russia’s destruction of their infrastructure.
Additionally, stronger-than-expected US employment data also added support for oil, as it increased the probability of a rate hike later in the year.