Middle East Conflict Pushes Oil Prices Higher Despite OPEC+ Output Hike

Oil prices rose sharply on Monday as renewed tensions in the Middle East reignited concerns over global energy supplies, reversing much of last week's decline driven by hopes of a diplomatic breakthrough between the United States and Iran.

As of 12:32 PM, Brent crude futures were up $3.27, or 5%, at $97.76 per barrel, while US West Texas Intermediate (WTI) crude gained $34.77, to trade at $94.82 per barrel.

The rally comes as the conflict in the region extends beyond 100 days, with efforts to secure a lasting peace agreement continuing to face setbacks.

Israel-Iran Conflict Rekindles Supply Concerns

The latest escalation began after Iran launched missile strikes on Israel, prompting retaliatory action from Israeli forces.

The Israeli Air Force said it had carried out attacks on military targets linked to the Iranian regime in western and central Iran, based on intelligence inputs.

Investor concerns intensified further after Israel launched fresh strikes on Lebanon on Sunday despite an existing ceasefire arrangement between the two countries.

The renewed hostilities have weakened hopes of a broader peace agreement between Washington and Tehran, which many market participants believed could eventually lead to the reopening of the Strait of Hormuz.

The strategic waterway handles a significant portion of global oil and gas shipments and remains a critical supply route for international energy markets.

Iran has linked any agreement with the United States to a ceasefire involving Lebanon. Following the latest attacks in Beirut, Tehran responded with missile strikes on Israel in support of Hezbollah.

Strait Of Hormuz Remains Key Risk

Although the wider conflict has remained relatively contained since the suspension of direct US and Israeli strikes on Iran in early April, shipping disruptions through the Strait of Hormuz continue to weigh on energy markets.

Iran's restrictions on shipping movements through the route have contributed to ongoing supply concerns and elevated freight costs.

The uncertainty has increased fears of tighter crude supplies at a time when several producers are already struggling to meet output targets.

OPEC+ Output Hike

Meanwhile, OPEC+ approved its fourth oil production increase in four months during a meeting on Sunday. The group agreed to raise output targets by 188,000 barrels per day from July.

The increase follows a similar rise in June and comes after larger monthly production hikes of 206,000 barrels per day approved in April and May.

However, analysts said the additional supply is unlikely to fully offset market concerns because several OPEC+ members remain unable to achieve their production targets due to logistical disruptions and export constraints.

Russia has also faced output challenges following attacks on energy infrastructure, limiting its ability to increase supply.

As a result, traders remain focused on geopolitical developments in the Middle East, with supply risks continuing to dominate sentiment in global oil markets.