Oil prices hit five-month high after US joins Israel in strikes on Iran 

SINGAPORE: Oil prices surged to their highest levels since January on Monday, following the United States’ participation in airstrikes on Iran’s nuclear facilities over the weekend, escalating tensions in the Middle East and fuelling concerns about potential supply disruptions. 

Brent crude futures rose by $1.92, or 2.49 per cent, to $78.93 a barrel as of 0117 GMT. US West Texas Intermediate (WTI) crude climbed $1.89, or 2.56 per cent, to $75.73. Earlier in the session, both benchmarks had jumped over 3 per cent, reaching $81.40 and $78.40 respectively—levels last seen five months ago—before easing slightly. 

The price surge followed US President Donald Trump’s announcement that American forces had “obliterated” key Iranian nuclear sites in coordination with Israeli strikes. Tehran has vowed to respond, raising fears of further escalation. 

Iran is the third-largest oil producer within the Organisation of the Petroleum Exporting Countries (OPEC). Traders are now closely watching for possible retaliation, particularly a potential move to block the Strait of Hormuz—a critical chokepoint through which about 20 per cent of global oil supply passes. 

Iran’s state-run Press TV reported that the Iranian parliament had approved a measure to close the strait, though Iran has previously issued such threats without acting on them. 

“The risks to oil infrastructure have significantly increased,” said June Goh, senior analyst at Sparta Commodities. She noted that although alternative pipelines exist, they cannot fully compensate for the volumes currently shipped through the strait. Many shipping companies are likely to avoid the region amid rising tensions, she added. 

In a note published Sunday, Goldman Sachs warned that Brent crude could temporarily spike to $110 per barrel if oil flows through the strait were reduced by half for a month. The bank projected prices would remain around 10 per cent lower than normal for nearly a year afterward. However, it maintained that no major supply disruptions were expected, citing global efforts to prevent prolonged outages. 

Since the conflict escalated on June 13, Brent has gained 13 per cent, while WTI is up about 10 per cent. 

Despite the sharp rise in prices, analysts noted that the current geopolitical risk premium may fade unless there is a clear and sustained disruption to oil supplies. Additionally, some analysts believe profit-taking from recent long positions may limit further gains. 

Ole Hansen, head of commodity strategy at Saxo Bank, wrote in a Sunday note that the recent rally could lose steam as some investors start to unwind their positions. 

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