Why Did Oil Prices Cross $100 for the First Time in Nearly 4 Years?

Oil prices surged past $100 a barrel for the first time in nearly four years as tensions in the Middle East intensified, major oil producers cut output and the Strait of Hormuz remained largely restricted. The spike comes as the United States signalled it could deepen the conflict involving Israel and Iran, raising fears of a prolonged disruption to global energy supplies.

The sharp rise in crude prices rattled financial markets across Asia on Monday, with several stock indexes falling after oil climbed more than 20 per cent. Investors are increasingly worried that rising energy costs could slow economic growth and trigger inflation, especially in oil-importing countries.

Brent crude crosses $100 after nearly four years

The global oil benchmark Brent crude rose above $100 a barrel for the first time since 2022. Oil prices are now about 50 per cent higher than they were before the United States and Israel launched attacks on Iran on February 28, according to a report by The New York Times.

When trading resumed on the Chicago Mercantile Exchange, Brent crude surged past $114 a barrel. This marked a 23 per cent jump from its Friday closing price of $92.69.

West Texas Intermediate (WTI), the main benchmark for US crude, was also trading at around $114 a barrel. That represents a rise of about 25 per cent from its previous close of $90.90.

Trump reacts as oil prices surge

US President Donald Trump sought to reassure consumers and businesses after oil prices crossed the $100 mark for the first time in more than three and a half years.

"Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace," Trump said in a social media post. "ONLY FOOLS WOULD THINK DIFFERENTLY."

Strait of Hormuz disruption fuels supply fears

Oil prices had already surged sharply in the previous week, with US crude rising 36 per cent and Brent gaining 28 per cent.

The ongoing conflict has drawn attention to physical supply risks in the Persian Gulf, one of the world's most critical oil-producing regions. About 15 million barrels of crude oil - roughly 20 per cent of global daily supply - normally pass through the Strait of Hormuz, according to energy research firm Rystad Energy.

However, fears of missile and drone attacks from Iran have nearly halted tanker movement through the narrow shipping route.

The Strait of Hormuz lies along Iran's northern coastline and is a vital transit point for oil and gas exports from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran.

Output cuts and attacks on oil facilities add pressure

The disruption to shipping has forced several Gulf producers to scale back production. Iraq, Kuwait and the United Arab Emirates have reduced output as storage tanks fill up due to limited export capacity.

At the same time, oil and gas infrastructure has also come under attack since the conflict began. Facilities linked to Iran, Israel and the United States have reportedly been struck during the fighting, increasing concerns about supply stability.

Analysts note that the last time Brent and US crude futures traded close to current levels was in 2022, shortly after Russia launched its invasion of Ukraine. The present surge, however, is more closely tied to risks around energy infrastructure and shipping routes in the Middle East.

With the conflict entering its second week and no clear resolution in sight, markets are bracing for continued volatility in global oil prices.