Oil prices surged by more than $4 on Monday, driven by investor concerns over Israeli strikes on Iran and renewed attacks on Lebanon. Brent crude futures rose $4.42, or 4.47%, to $97.15 per barrel as of 0609 GMT, while US crude futures increased $4.07, or 4.50%, to $94.61 per barrel.
Israeli Strikes Target Iranian Petrochemical Plant
Israel announced on Monday that it had hit a petrochemical plant in southwestern Iran, along with other military targets. This marked the first attack on an energy site inside Iran since the April 8 ceasefire. A provincial official told Iran's semi-official Fars news agency that parts of the Mahshahr petrochemical complex were damaged. The strikes occurred despite reports that US President Donald Trump had advised Israeli Prime Minister Benjamin Netanyahu to avoid further attacks.
Impact on Global Oil Supply
The escalation has diminished hopes for an imminent end to the broader conflict and a resumption of crude flows through the Strait of Hormuz, a critical chokepoint for about one-fifth of the world's oil and liquefied natural gas. Monday's gains erased Friday's losses, which had been driven by optimism over a potential de-escalation in the US-Iran conflict. Oil prices have climbed nearly 60% since the war began in late February but remain below the March highs, when Brent reached nearly $120 per barrel.
Retaliatory Missiles and Ceasefire Hopes
On Sunday, Iran fired a salvo of missiles at Israeli targets in retaliation for the strikes on Lebanon. Despite the tensions, US President Donald Trump insisted that an agreement to end the war remains within reach. Iran has made a ceasefire with Lebanon a condition for a peace deal with Washington. Israel invaded Lebanon in March after Iran-backed Hezbollah fired rockets and drones across the border. Lebanon and Israel announced a ceasefire on June 3 following negotiations in Washington.
Strait of Hormuz Under New Conditions
Iran's ambassador to Moscow stated on Monday that the Strait of Hormuz will remain open but under new conditions set by Iran and Oman, including a transit fee. Ambassador Kazem Jalali told the Russian newspaper Izvestia that the strait would be open with new terms determined by Iranian and Omani authorities. Tehran has been blocking most shipping through the Strait of Hormuz, while Washington has imposed its own blockade on Iranian ports.
OPEC+ Output Increase
Amid the supply crisis, OPEC+ agreed on Sunday to its fourth increase in oil output in four months. However, analysts said the decision would have little impact since most OPEC+ members cannot meet their output targets due to the Hormuz closure or, in Russia's case, infrastructure attacks that have eroded production capacity. Rystad Energy's head of geopolitical analysis, Jorge Leon, noted in a client briefing that the physical impact of such a decision would be close to zero in the current market.
