Energy prices soar as Iran war disrupts oil supplies

Chicago: Oil prices surged to levels not seen in years on Monday as the Iran war intensified, threatening energy production and shipping routes in the Middle East and rattling global financial markets.

The price of Brent crude, the international benchmark, jumped to USD 119.50 per barrel early in the day before easing to around USD 106, still about 14 per cent higher. West Texas Intermediate (WTI) crude also climbed above USD 119 before retreating to about USD 103 per barrel.

The conflict, now in its second week, has increasingly affected key oil-producing regions and transport routes in the Persian Gulf. Bahrain accused Iran of striking a desalination plant vital to drinking water supplies, while its national oil company declared force majeure after an Iranian attack set a refinery complex ablaze. Oil depots in Tehran were also reported to be smouldering following Israeli strikes.

Roughly 15 million barrels of crude oil, about 20 per cent of global supply — normally pass daily through the Strait of Hormuz, according to Rystad Energy. However, fears of Iranian missile and drone attacks have largely halted tankers carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran through the vital waterway.

With exports disrupted, Iraq, Kuwait and the UAE have cut production as storage tanks fill. Iran, Israel and the United States have also targeted energy facilities since the conflict began, deepening supply concerns.

Oil prices moderated later after reports that Group of Seven (G7) countries may release strategic oil reserves to stabilise markets. French President Emmanuel Macron said the option was under consideration and G7 leaders could meet this week to coordinate a response.

The surge in energy prices is pushing fuel costs higher worldwide and raising inflation concerns. In the US, the average price of regular gasoline rose to USD 3.48 per gallon, nearly 50 cents higher than a week earlier, while diesel climbed to USD 4.66.