Oil prices surged at the opening of market trading on Sunday due to U.S. and Israeli attacks on Iran and retaliatory strikes on Israel and U.S. military installations in the Gulf, leading to disruptions in the global energy supply chain.
Traders anticipated a slowdown in oil supply from Iran and other Middle Eastern countries. Incidents in the region, such as attacks on two vessels in the Strait of Hormuz, could impede countries’ oil exports, resulting in higher prices for crude oil and gasoline.
West Texas Intermediate, a type of crude oil produced in the U.S., saw a price increase to around $72 per barrel on Sunday night, up approximately 8% from Friday’s trading price of $67.
Approximately 15 million barrels of oil per day, representing about 20% of the world’s oil, pass through the critical chokepoint of the Strait of Hormuz. Any disruptions in this shipping channel could lead to reduced supply and higher oil prices.
In mid-February, Iran temporarily closed parts of the Strait of Hormuz for a military drill. Further disruptions in this key shipping route could result in lower supply and increased oil prices.
Against this backdrop, the OPEC+ oil cartel announced an increase in crude oil production on Sunday. OPEC countries, including Saudi Arabia and Russia, agreed to raise output by 206,000 barrels per day in April.
Iran exports around 1.6 million barrels of oil daily, mainly to China. If Iran’s exports are disrupted, China may need to seek alternative sources, potentially leading to higher energy prices.
