Oil surges above $110 as Gulf attacks stoke supply fears

LONDON/DUBAI: Global oil prices extended gains on Monday after fresh attacks in the Gulf intensified fears of supply disruptions, lifting energy markets already rattled by geopolitical tensions, rising bond yields and concerns over shipping through the Strait of Hormuz.

Brent crude futures rose around 1.2 per cent to about $110.7 a barrel, while U.S. West Texas Intermediate (WTI) crude gained roughly 1.0-1.8 per cent to trade near $106-$107 a barrel.

Murban crude from the United Arab Emirates recorded the sharpest increase among major benchmarks, climbing about 3.3 per cent to around $108 a barrel.

The latest rally followed a drone strike that triggered a fire at a nuclear power facility in the United Arab Emirates, while Saudi Arabia said it intercepted three drones targeting the kingdom. The developments renewed concerns over instability in the Gulf region, a critical hub for global energy supplies.

U.S. President Donald Trump also warned Iran to move quickly towards a deal, adding to market anxiety over escalating tensions in the Middle East.

Concerns have increasingly centred on the Strait of Hormuz, a strategic waterway through which roughly one-fifth of the world’s oil trade passes. Shipping disruptions in the area have already raised fears of tighter supplies and higher transportation costs for crude exports.

Analysts said growing uncertainty over supply routes and stronger global demand expectations were continuing to support oil prices.

“The closure is draining global oil inventories fast,” analysts at Capital Economics said in a note.

They warned inventories could fall to critical levels by the end of June, potentially pushing Brent crude prices to between $130 and $140 per barrel if disruptions intensify further.

Analysts also cautioned that if the Strait of Hormuz remained closed through the end of the year and oil prices stayed near $150 per barrel into 2027, inflation in major economies such as Britain and the euro zone could approach 10 per cent, raising the risk of a global recession.

The rise in oil prices reverberated across broader financial markets.

U.S. Treasury yields climbed sharply, with benchmark 10-year yields rising to 4.584 per cent after increasing 23 basis points last week, while 30-year yields stood at 5.109 per cent.

Asian equities weakened as investors shifted towards safer assets. Japan’s Nikkei index fell about 0.4 per cent, while South Korean stocks dropped more than 2 per cent after a recent rally in semiconductor shares lost momentum. MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.6 per cent.

In currency markets, the U.S. dollar strengthened on safe-haven demand. The euro traded near $1.1620 after posting a weekly decline of 1.4 per cent, while sterling stood at around $1.3318 following losses linked to political uncertainty and higher bond yields.

Gold prices were largely steady at about $4,540 an ounce despite heightened geopolitical tensions.

Investors are also closely watching a meeting of G7 finance ministers in Paris, where discussions are expected to focus on the Strait of Hormuz, global supply chains and the economic fallout from rising geopolitical risks.

Market attention later this week will turn to corporate earnings, particularly from major technology and retail companies, for clues on whether higher energy costs are beginning to weigh on consumer demand and business sentiment globally.

In Pakistan, the latest increase in global crude prices could add pressure on domestic fuel prices after the government recently announced a modest reduction in petrol and diesel rates. Analysts said continued gains in international oil markets may force Islamabad to raise petroleum product prices again in the coming weeks.