Oil prices have risen above $100 per barrel amid the consequences of the war between the United States and Israel over Iran.
International benchmark Brent crude rose more than 20 per cent on Sunday, reaching $114 a barrel at one point, as fears grew of prolonged disruption to global energy supplies, particularly due to potential sanctions and military actions affecting oil exports from the region.
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After falling slightly lower, the benchmark was hovering around $107.50 as of 02:30 GMT on Monday.
Oil prices rose above $100 a barrel for the first time since Russia’s 2022 invasion of Ukraine.
US President Donald Trump, who campaigned heavily on cost-of-living concerns in his 2024 election, ignored the price hike.
“Short-term oil prices, which will fall sharply if Iran’s nuclear threat is annihilated, are a very small price to pay for the security and peace of the United States and the world,” Trump said in a post on Truth Social.
“Only a fool would think differently!”
US Energy Secretary Chris Wright also played down the possibility of energy price increases on CBS News’ Face the Nation program on Sunday, saying any increase in prices at the gasoline pump would be “temporary.”
Crude oil prices have increased by nearly 50 per cent since the US and Israel launched joint strikes on Iran on February 28.
Iran has responded by effectively blocking shipping in the Strait of Hormuz, putting about a fifth of the global oil supply at risk.
Iraq, the United Arab Emirates and Kuwait, the Organization of the Petroleum Exporting Countries (OPEC)’s three biggest producers, have cut output as a backlog of barrels accumulates due to the waterway effectively being closed.
Attacks on energy production facilities in the region have further endangered supplies.
Iran has been blamed for several attacks on energy facilities across the Gulf, including in Qatar, Saudi Arabia and Kuwait.
On Saturday, Israel carried out airstrikes targeting Iran’s oil infrastructure for the first time since the war began.
According to Iranian state media, the attacks hit four oil storage facilities and an oil production transfer center in Tehran and Alborz provinces.
Iran’s Revolutionary Guard Corps (IRGC) threatened to target energy facilities across the region in retaliation on Sunday, warning that oil prices could rise to $200 a barrel if the US and Israel “continue this game.”
Shares in Asia fell sharply on Monday morning as investors braced for the impact of rising energy prices.
Japan’s Nikkei 225 fell more than 7 per cent in early trading, while South Korea’s KOSPI fell more than 8 per cent.
The Hang Seng index in Hong Kong fell nearly 3 percent.
Significant losses also occurred in US stock futures, which trade outside regular market hours.
Futures tied to Wall Street’s benchmark S&P 500 fell 1.7 per cent, while futures on the tech-heavy Nasdaq Composite dropped 1.90 per cent.
While Trump administration officials have insisted the war will be over in a matter of weeks, the prospect of prolonged disruptions to global energy supplies has sparked fears of higher inflation and slower economic growth.
The International Monetary Fund has estimated that a sustained 10 per cent increase in oil prices leads to a 0.4 per cent increase in inflation and a 0.15 per cent reduction in global economic growth.
“If the shock proves short-lived, the global economy could recover quickly,” Mike O’Rourke, chief market strategist at JonesTrading, told Al Jazeera.
“If oil remains at these levels for several weeks, it would be a major global headwind. So far, markets have underestimated the risks related to the conflict in Iran.”
In an interview published by The Financial Times on Friday, Qatar’s Energy Minister Saad al-Kaabi warned that all producers in the region could soon be forced to halt production and prices could reach $150 a barrel.
“Whoever did not invoke force majeure, we expect to do so in the next few days so that this can continue,” al-Kaabi told the newspaper.
“All Gulf region exporters will have to take a force majeure call.”
