Oil prices extended their gains on Monday after renewed attacks involving the United States and Iran increased concerns about a prolonged disruption to crude supplies from the Middle East.
Brent crude futures rose 79 cents, or 0.82 per cent, to $97.07 a barrel by 0512 GMT.
US West Texas Intermediate crude gained 80 cents, or 0.87 per cent, to $92.28 a barrel.
The latest increase followed a sharp rally the previous week, when Brent crude rose 7.8 per cent and WTI gained nearly 10 per cent.
The market reaction reflected growing concern about the effect of military activity on oil shipments through the Strait of Hormuz.
Hormuz remains central to supply concerns
The Strait of Hormuz is one of the world’s most important oil transit routes.
A significant proportion of global crude oil supplies passes through the waterway, making it highly sensitive to geopolitical tensions.
Any prolonged disruption could reduce the amount of oil reaching international markets and push prices higher.
The latest attacks have raised concerns that the conflict could affect tanker movements, insurance costs and shipping routes.
The risk of disruption is particularly significant for major Asian oil importers, which rely heavily on supplies from the Middle East.
Tit-for-tat attacks escalate
US forces struck three Iranian oil tankers on Saturday, according to US Central Command.
One of the vessels was reportedly attacked off the coast of Kharg Island, near Iran’s major oil export hub.
Iran’s Islamic Revolutionary Guard Corps Navy said it had targeted three oil tankers travelling through unauthorised routes in the Strait of Hormuz, as well as three additional US vessels in other areas.
Maritime intelligence firm Marisks described the attacks as a major escalation in the maritime conflict.
The developments have increased uncertainty over whether commercial shipping can continue safely through the waterway.
Even where shipments are not physically halted, heightened security risks can increase insurance premiums and freight costs.
Those additional costs may eventually be reflected in crude and petroleum product prices.
Impact on global markets
The increase in oil prices could have wider implications for the global economy.
Crude oil is a major input for transportation, manufacturing, electricity generation and several industrial processes.
Higher oil prices can increase production and distribution costs, contributing to inflationary pressure.
For oil-producing countries, rising prices may improve export earnings and government revenue.
However, for oil-importing economies, higher crude prices can increase fuel costs, widen trade deficits and place pressure on foreign exchange reserves.
The impact on Nigeria would depend on the balance between higher crude export earnings and the cost of imported refined petroleum products.
Investors monitor duration of disruption
Markets are expected to remain sensitive to developments around the Strait of Hormuz and the broader US-Iran conflict.
The immediate concern is whether attacks will continue and whether commercial shipping will face further restrictions.
If the disruption remains limited and shipments continue, prices could stabilise.
However, a prolonged reduction in oil flows could create tighter global supply conditions and lead to further price increases.
The latest rally highlights the vulnerability of energy markets to geopolitical developments, particularly when they affect major shipping routes.
For governments, businesses and consumers, sustained higher oil prices could increase the cost of energy and transportation.
For investors, the key question is whether the latest supply concerns will result in a temporary price spike or a longer period of elevated crude prices.
