Middle East tensions push oil prices up... Concerns arise about a supply crisis if the conflict escalates.
Oil prices witnessed a significant increase during trading on Monday, June 16, driven by escalating tensions between Iran and Israel following exchanges of attacks, raising concerns about the widening scope of the conflict and its impact on oil flow from the Middle East region.
Brent crude futures rose by 1.16% to reach $75.10 per barrel, while West Texas Intermediate crude jumped by 1.34% to $73.96. Both crude types achieved larger gains earlier in the session, surpassing a $4 mark.
This increase follows a significant jump in prices during last Friday's session, with both crude types rising by 7%, after registering over 13% increase during the same session, reaching their highest levels since January.
The recent escalation between Israel and Iran raised concerns about disrupting oil movement through the Strait of Hormuz, the strategic passage where between 18 to 19 million barrels pass daily, around a fifth of global consumption of crude oil, condensates, and fuels.
US President Donald Trump expressed hope for a ceasefire between the two sides, stating that countries "sometimes have to fight to the end." Trump affirmed Washington's support for Israel but did not disclose whether he asked them to halt attacks on Iran.
In a related context, German Chancellor Friedrich Merz expressed expectations that the G7 leaders, in their meeting today in Canada, will reach an agreement to calm the situation and prevent further escalation of the conflict.
Reuters reported, citing a source familiar with mediation efforts, that Iran informed Qatar and Oman of its unwillingness to negotiate a ceasefire as long as it faces Israeli attacks, amid growing fears of conflict expansion in the region.
Iran, an OPEC member, produces around 3.3 million barrels per day and exports over two million barrels of oil and fuel.
Analysts believe that OPEC and its allies, led by Russia, have sufficient spare capacity to compensate for any potential supply shortages, almost matching Iran's production volume, increasing market sensitivity to any possible disruptions.
