Crude Soars 30% Amid Iran–Israel Tensions, Supply Cuts Shake Global Markets

The US benchmark crude oil price jumped over 30% on Monday amid concerns over prolonged supply chain disruption arising from ongoing geopolitical tension in West Asia. West Texas Intermediate rose as high as 30.4% to $118.21 per barrel, while Brent crude prices rose nearly 28% to $118.22 per barrel.

Crude oil prices have hit their highest level since July 2022 as tensions between Iran, Israel and the US have rattled global markets, leading major West Asian oil producers to slash their supplies amid worries of shipping disruption through the Strait of Hormuz.

Iraq and Kuwait have cut their oil output, while Qatar has reduced its production of liquefied natural gas (LNG) as Iran announced a near-complete closure of the Strait. As per a Reuters report citing analysts, the United Arab Emirates and Saudi Arabia are also likely to slash their output as soon as they run out of oil stockpiles.

Iraqi oil production from its southern oilfields has fallen by 70% to just 1.3 million barrels per day, the Reuters report said, citing three industry sources.

The likelihood of prolonged and elevated tensions in West Asia is likely to leave global markets and consumers with weeks or even months of higher fuel prices. As per the report, even if the week-old conflict comes to a resolution soon, suppliers will continue to bear the brunt of damaged facilities, disrupted logistics and elevated risks to shipping.

Indian officials have reinforced that fuel prices will not rise despite the sharp increase in global crude prices. However, with no signs of the geopolitical tensions easing in the near term, New Delhi may have to scramble for oil suppliers, even with elevated freight and crude prices.

Last week, Russia agreed to sell crude to India, however, this time at a premium amid rising demand. India has crude stockpiles to survive up to 60 days. But unlike crude, India does not have any reserves for LNG and liquefied petroleum gas (LPG), leaving it the most exposed to vulnerability and scarcity.

Iran Names Khamenei’s Son as New Leader

Iran on Monday named Mojtaba Khamenei to succeed Ali Khamenei as the supreme leader. Back in 2019, the US sanctioned Mojtaba Khamenei, alleging that he represented his father in political matters and worked with Iranian security forces to advance the government’s regional and domestic policies. Mojtaba Khamenei’s rise to the supremo position marks a rare hereditary transition at the top of Iran’s political system.

Since the Islamic Revolution of 1979, the country had overthrown monarchy, ending centuries of dynastic rule. Worries continue as Israel’s military has threatened to kill any replacement for Khamenei, while Trump stated that the war might only end once Iran’s military rulers had been wiped out.