Global crude oil prices surged more than 4% after Israel and Iran exchanged fresh strikes, rattling already fragile expectations of de-escalation in the region even as US President Donald Trump signalled that a peace deal remains within reach. The renewed hostilities have intensified concerns over potential disruption to the Strait of Hormuz, a critical chokepoint for global oil supplies.
Brent crude futures climbed $4.42, or 4.47%, to $97.15 a barrel, while US West Texas Intermediate (WTI) rose $4.07, or 4.50%, to $94.61 a barrel, according to Reuters data.
The escalation marks a sharp reversal in sentiment after oil prices slipped on Friday amid optimism over progress in US-Iran diplomatic engagement. The conflict, which intensified in late February, has previously pushed crude prices as high as $120 per barrel during peak volatility in March.
On Sunday, Iran launched missile strikes targeting Israeli positions following earlier air strikes on Lebanon. Israel responded with retaliatory strikes on Iranian territory, including a petrochemical facility, despite calls from Trump for restraint and his assertion that a deal is “very close.”
A durable ceasefire between Israel and Lebanon, along with an immediate halt to hostilities, remains a key demand from Tehran as part of any prospective agreement with Washington.
In parallel, OPEC+ agreed to raise production by 188,000 barrels per day in July, marking a fourth consecutive monthly increase. However, the output boost comes against a backdrop of ongoing logistical constraints, with several members struggling to meet targets amid disruptions linked to tensions around the Strait of Hormuz.
Rising oil prices have reignited inflation concerns across major economies, particularly in the United States, where higher energy costs are weighing on household budgets and contributing to a decline in consumer sentiment, which hit a record low in May.
Adding to macroeconomic uncertainty, stronger-than-expected US labour market data released on Friday dampened expectations of near-term rate cuts by the Federal Reserve. Newly appointed Fed Chair Kevin Warsh is set to preside over his first Federal Open Market Committee (FOMC) meeting on June 16–17.
According to a Reuters report, Goldman Sachs now expects the Federal Reserve to hold interest rates steady through 2026, pushing back any potential rate cuts until 2027.
(With inputs from ANI)