Oil prices rose as the US struck Iran’s nuclear facilities, raising fears over the Strait of Hormuz and potential supply disruptions amid Middle East tensions

[dropcap]O[/dropcap]il prices rose on Monday while the dollar gained strength, following a weekend airstrike by the United States on Iran’s nuclear facilities.

Also read: Iran warns US as conflict with Israel deepens

The move intensified concerns over a possible escalation in the Middle East and its ripple effects on global markets.

Asian stock markets largely declined as investors remained cautious, awaiting Iran’s next move. However, Chinese markets bucked the trend, closing higher.

One of the key concerns is whether Tehran could retaliate by attempting to block the Strait of Hormuz, a strategic waterway through which nearly 20 percent of the world’s oil supply is transported.

Iran, the world’s ninth-largest oil producer, pumps around 3.3 million barrels per day, exporting nearly half of that and consuming the rest.

When trading opened Monday, Brent crude and West Texas Intermediate (WTI) crude both surged over 4 percent, hitting their highest levels since January.

However, the gains moderated, and by mid-afternoon in Asia, both benchmarks were up by around 1.1 percent.

“So far, satellite images reportedly suggest that oil continues to flow through the Strait, which may explain the muted market reaction,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“Many remain optimistic that Iran will avoid a full-blown retaliation and regional chaos, to prevent its own oil facilities from becoming targets and to avoid a widening conflict that could hurt China — its biggest oil customer.”

Nonetheless, she warned that “if things get uglier,” oil prices could spike above $100 per barrel. As of Monday, WTI was trading at approximately $75 per barrel.

Economists at MUFG cautioned that “an oil price shock would create a real negative impact on most Asian economies,” which are heavily reliant on energy imports.

Among Asian markets, Tokyo fell 0.1 percent, Seoul dipped 0.2 percent, Sydney declined 0.4 percent, and Jakarta tumbled 1.7 percent. In contrast, Hong Kong rose 0.6 percent, while Shanghai climbed 0.7 percent.

European indices were lower in early trading, with London, Frankfurt, and Paris all in negative territory.

The US dollar strengthened slightly against major currencies. However, Bloomberg strategist Sebastian Boyd questioned the durability of the rally.

“If the increase proves to be just a knee-jerk reaction to short-lived US involvement, the dollar’s downward path is likely to resume,” he said.

Chris Weston of Pepperstone noted that Iran may not need to close the Strait of Hormuz to create economic disruption.

“By planting enough belief that they could disrupt this key logistical channel, maritime costs could rise, significantly affecting crude and gas supply,” he explained.

Key prices and indices (as of 0700 GMT)

Brent crude: up 1.1% to $78.08
WTI crude: up 1.1% to $74.89
Nikkei 225 (Tokyo): down 0.1% to 38,354.09
Hang Seng (Hong Kong): up 0.6% to 23,661.88
Shanghai Composite: up 0.7% to 3,381.58
FTSE 100 (London): down 0.3% to 8,743.99
Euro/dollar: down to $1.1512
Pound/dollar: up to $1.3445
Dollar/yen: up to ¥147.14
Euro/pound: down to 85.62p
Dow Jones (New York): up 0.1% to 42,206.82

Also read: Iran warns Israel of retaliation over nuclear site threats

As geopolitical uncertainty lingers, markets are bracing for possible oil supply disruptions and broader financial instability depending on Iran’s next move.