BY COMFORT OGBONNA
Oil prices climbed more than 2% on Monday as renewed military exchanges between the United States and Iran, coupled with an escalation in Israel’s conflict with Hezbollah, reignited concerns about energy supplies from the Middle East and pushed investors back toward the oil market.
U.S. West Texas Intermediate (WTI) crude futures rose $2.29, or 2.62%, to $89.65 per barrel, while Brent crude futures gained $2.05, or 2.25%, to trade at $93.17 per barrel in early trading. The gains reflected growing fears that the fragile security situation in the region could disrupt energy exports and delay efforts to ease tensions.
The latest rise in oil prices came after a series of military actions over the weekend heightened uncertainty surrounding prospects for a broader ceasefire agreement between Washington and Tehran. Market participants had previously hoped that diplomatic efforts would lead to an extension of the ceasefire arrangement announced earlier this year, potentially reducing risks to global energy supplies.
Those expectations weakened after the United States said it carried out what it described as “self-defense strikes” against Iranian radar installations and drone-control facilities located in Goruk and on Qeshm Island. Washington said the operation was a response to what it characterized as aggressive actions by Tehran in recent days.
Iran responded by announcing that its Islamic Revolutionary Guard Corps had targeted an air base allegedly connected to a U.S. attack on a telecommunications facility on Sirik Island. The exchange marked another escalation in the long-running confrontation between the two countries and added to fears that hostilities could spread further across the region.
At the same time, Israel ordered troops to move deeper into Lebanon as fighting with Hezbollah intensified. The militant group, which is backed by Iran, remains a central factor in ongoing regional tensions. The developments came only days after the United States hosted peace discussions involving Israel and Lebanon in Washington, highlighting the fragile state of diplomatic efforts.
Investors had been closely monitoring signals from Washington regarding a possible extension of the ceasefire agreement with Iran. U.S. President Donald Trump said on Friday that a decision on the proposal would be made soon. The extension is viewed as an important step toward creating additional time for negotiations aimed at reaching a lasting resolution to disputes surrounding Iran’s nuclear program and broader regional security concerns.
Any future agreement is expected to require cooperation from multiple parties, including Israel and Hezbollah. Iranian officials have repeatedly stated that Hezbollah’s interests must be taken into account in any comprehensive settlement. U.S. officials have proposed a gradual de-escalation framework under which Hezbollah would halt attacks on Israel while Israel would refrain from expanding military operations in Beirut and other parts of Lebanon.
Despite ongoing diplomatic efforts, concerns about the security of the Strait of Hormuz continue to dominate oil market sentiment. The strategic waterway serves as one of the world’s most important energy transit routes, carrying roughly one-fifth of global oil and gas shipments. Any disruption to traffic through the strait has the potential to affect global energy markets significantly.
Analysts warn that reports of additional mine deployments in the area could complicate efforts to restore normal shipping operations. Market participants fear that even if a broader agreement is reached, reopening the waterway and restoring confidence among shipping operators could take time. As a result, supply disruptions may persist longer than initially anticipated.
The uncertainty surrounding the Strait of Hormuz has become particularly significant because Iran has effectively restricted passage through the route since the conflict escalated following U.S. and Israeli military actions earlier this year. Energy traders are therefore closely watching developments in the region for signs of either further escalation or progress toward a diplomatic solution.
While geopolitical tensions provided strong support for oil prices, traders also weighed economic signals from China. Data released over the weekend indicated that factory activity in the world’s second-largest economy remained sluggish, raising concerns about weakening demand for fuel and industrial commodities.
China’s economy continues to face challenges from slowing exports, subdued domestic demand, and ongoing cost pressures on manufacturers. The weak economic data reinforced worries that global oil consumption growth may not be strong enough to absorb additional supply if geopolitical risks eventually ease.
Investment bank Goldman Sachs highlighted the mixed outlook facing the energy market. The bank noted that weaker-than-expected oil demand from China and Europe represents a significant downside risk to its forecasts for crude prices later this year. Goldman Sachs currently expects Brent crude to average around $90 per barrel in the fourth quarter and WTI crude to trade near $83 per barrel.
However, analysts emphasized that supply disruptions in the Middle East remain a major wildcard. Any deterioration in regional security, prolonged restrictions on shipping routes, or additional attacks on energy infrastructure could quickly tighten global supplies and drive prices substantially higher.
For now, the oil market remains caught between two competing forces: concerns over slowing global demand and fears of supply disruptions stemming from escalating geopolitical tensions. With military activity continuing across the Middle East and diplomatic negotiations still uncertain, traders are likely to remain highly sensitive to developments that could influence the balance between supply and demand in the weeks ahead.
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