Oil surges past $90 as Iran strikes back at US military bases, treasury tightens financial vise on Tehran

The military escalation comes at the same time as Washington is increasing its financial pressure on Iran, putting more pressure on banks and businesses that continue to deal with Tehran. 

Oil rises above $90 as fighting returns near Hormuz 

Brent crude rose more than 2% on Monday, moving back above $90 a barrel for the first time in weeks. Brent gained $2.22, or 2.5%, to settle at around $90.32 a barrel. US West Texas Intermediate crude rose $2.01, or 2.4%, to about $85.41 a barrel, Reuters reported.

The jump came after the US confirmed that its forces had struck two Iranian rocket-launcher positions on Larak Island in the Strait of Hormuz on Sunday. It was the first known US attack on Iran since late July. 

A US official told Al Jazeera that the rocket launchers had been prepared to fire rockets carrying mines into the strait. The Strait of Hormuz is one of the world’s most important oil routes. Before the war, about one-fifth of global oil consumption passed through the waterway. 

Iran’s Revolutionary Guard Corps, or IRGC, confirmed the US strike. It said several of its personnel had been killed and wounded and promised to retaliate, warning that the “aggressor” would be punished. Iranian news agencies Fars and Tasnim also reported explosions on Larak Island. 

Iran strikes Jordan air bases in retaliation 

Iran responded within hours.

Regional reports said IRGC forces launched a coordinated attack using ballistic missiles against Jordan’s King Hussein and Muwaffaq Salti air bases early Monday. US defence officials said air-defence systems managed to intercept most of the missiles. 

The latest exchange comes as the US-Israel war with Iran enters its seventh month. The conflict began on February 28 after the killing of Iran’s supreme leader.

Thousands of people have been killed and millions displaced since the fighting began. Eighteen US service members have also died.

The war has also caused the biggest geopolitical disruption to global oil supplies on record, according to a Dallas Fed research paper. The paper said the shock has been larger than the combined impact of the 1973 and 1990 oil crises. 

Iran has also attacked US and allied positions during the conflict, including installations in Bahrain, the UAE and Saudi Arabia, as well as British bases in Cyprus and the Indian Ocean. 

After months of fighting, the conflict had largely settled into a stalemate. Washington had also started putting more focus on economic and financial pressure instead of relying mainly on bombing campaigns. 

Bessent warns another bank will face sanctions 

Even before the latest strikes, the US had made clear that it was preparing to increase its financial pressure on Tehran. Treasury Secretary Scott Bessent told the Associated Press that Washington plans to sanction another bank this week as part of its effort to cut Iran off from the global financial system. 

Speaking from Asheville, North Carolina, ahead of the G20 finance meetings, Bessent did not reveal the name of the bank. But he said the move was part of a wider effort to economically isolate Iran. 

“This is going to be financial violence if we have to,” Bessent said.

He also warned banks and trading partners that the US was watching their dealings with Iran. “We know who you are… and this has got to stop,” he said.

Bessent said he plans to meet separately with finance officials from major economies as well as developing countries during the G20 meetings. His aim is to get more countries behind Washington’s efforts to isolate Iran economically.

One important meeting will be with Chinese officials. China is Iran’s biggest buyer of oil, making Beijing a key part of Washington’s efforts to restrict Tehran’s oil revenues. Bessent said “all options are on the table” when asked about possible action against China over its continued purchases of Iranian crude. 

At the same time, he rejected suggestions that the Trump administration had become less tough on China. He argued that Washington and Beijing have a shared interest in reopening the Strait of Hormuz and stopping Iran from developing a nuclear weapon.

So far, the Treasury’s approach has focused more on warnings than on imposing broad new sanctions on countries and banks that continue doing business with Iran.

The administration reportedly decided not to sanction an Egyptian bank that was suspected of helping facilitate Iranian transactions.

Where could oil prices go next? 

Monday’s rise is only the latest move in an extremely volatile year for oil prices. Brent stayed above $100 a barrel for much of the second quarter after the war began. It then climbed above $110 in May. 

Prices later fell sharply, dropping below $70 a barrel in mid-June after the Strait of Hormuz briefly reopened under a ceasefire agreement. 

Oil prices began climbing again in July and August as the ceasefire started to fall apart. Brent reached around $85 to $88 a barrel as talks between Iran and Oman over restoring shipping through the strait stalled. 

So far, however, the oil market has been able to deal with the disruptions by using existing stockpiles instead of facing an immediate shortage. 

There is no clear agreement among forecasters about where oil prices will head from here.

The US Energy Information Administration has raised its forecast for average Brent prices in 2026 several times since the war began.

Goldman Sachs has warned that Brent could average above $100 a barrel in the second half of the year if the Strait of Hormuz remains effectively closed for a long period.

JP Morgan has a different view. It expects the balance between oil supply and demand could eventually bring prices down toward the high $70s once the conflict comes to an end.

For now, much will depend on what happens next in the Middle East.