Oil Prices Rise As Gulf Tensions Push Brent And WTI Higher

Oil prices climbed further on Monday, extending last week’s sharp rally, as traders reacted to rising tensions linked to Iran and weak progress in Middle East de-escalation talks. Reports of a strike on a nuclear facility in the United Arab Emirates also unsettled markets, pushing key benchmarks well above the $100 per barrel level.

Around 7 am IST, global benchmark Brent crude traded at $111.5, up $2.23 or 2.04%. US benchmark WTI crude stood at $108.0, gaining $2.54 or 2.41%. These moves followed gains of more than 7% for both benchmarks in the previous week, reflecting persistent geopolitical risk.

Oil prices surge as Brent crude and WTI crude react to Gulf tensions

Oil prices have been rising since the US and Israel carried out joint strikes on Iran on February 28. Tehran responded by tightening flows through the Strait of Hormuz, a shipping lane that handles about 20% of global energy supplies. Diplomatic attempts to stabilise traffic and reduce seizures and attacks have so far shown little progress.

With continued disruption around the Strait of Hormuz, oil prices remain comfortably above $100, compared with around $70 earlier. At the same time, regional security worries have increased after a series of drone incidents involving the UAE and Saudi Arabia, alongside more confrontational exchanges between Washington and Tehran over recent weeks.

Oil prices, regional attacks and US-Iran tensions drive market anxiety

Officials in the UAE, quoted by Reuters, said they were examining a strike on the Barakah nuclear power plant. Authorities stated that the UAE retained the right to retaliate against what they called "terrorist attacks." Saudi Arabia reported intercepting three drones that entered its airspace from Iraq and warned of necessary operational measures.

IG market analyst Tony Sycamore said, "These drone strikes are a pointed warning - renewed US or Israeli strikes on Iran could trigger more proxy attacks on Gulf energy and critical infrastructure by Iran or its regional proxies." According to Axios, US President Donald Trump is due to meet senior national security advisers on Tuesday to weigh possible military options regarding Iran.

Moody's Ratings said oil-importing economies are likely to seek bilateral deals to secure supplies, possibly using coordinated transit corridors. The firm’s geopolitical risk review noted limited signs of a lasting agreement between the US and Iran, which, in its view, reduces the likelihood of a full reopening of the Strait of Hormuz.

Discussing oil prices, Moody's Ratings stated, "We now expect Brent crude in the USD 90-110/bbl range for much of this year, with significant volatility, including occasional fluctuations outside this range in response to new developments." The agency added that keeping oil within this band could trim real GDP growth by 0.2 to 0.8 percentage points in several major economies.