Oil rises above $115 as war enters fifth week

Global oil prices surged and stock markets dropped sharply on Monday morning in Asia as the US-Israel conflict entered its fifth week.

Brent crude oil prices increased by over 3%, reaching more than $115 per barrel, while US-traded oil rose by 3.5% to $103. This puts Brent on track for its largest monthly increase on record.

Asian stock markets opened lower, with Japan’s Nikkei 225 down by 4.5% and South Korea’s Kospi falling by 4%.

The recent market moves come after Iran-backed Houthi rebels in Yemen joined the conflict, launching attacks on Israel over the weekend. Iran has also threatened to expand retaliatory strikes against US and Israeli officials’ homes and universities.

In an interview with the Financial Times on Sunday, US President Donald Trump suggested that the US could seize Iranian oil, including the major fuel hub of Kharg Island. He said the US would easily take control of the island, comparing the action to the US’s ongoing control over Venezuela’s oil industry, following the seizure of assets in January.

Iran’s parliament speaker also warned that the country’s forces were “waiting for American soldiers” as an additional 3,500 US troops were deployed to the Middle East over the weekend.

Energy markets have been extremely volatile after Iran retaliated to US and Israeli strikes, threatening to attack ships crossing the Strait of Hormuz. This narrow waterway typically handles around 20% of the world’s oil and gas supply, but shipments have been disrupted, contributing to the rise in prices.

Sean Foley, an energy markets expert from Macquarie University, stated that oil prices are likely to continue increasing unless the conflict de-escalates.

The recent Houthi attacks have sparked concerns that the group could also disrupt energy shipments passing through the Bab al-Mandeb Strait near Yemen. A blockade of this passage could affect an additional 10% of the world’s oil supply, further straining global supply chains.

Andrew Lipow, from consulting firm Lipow Oil Associates, predicted that Brent crude could reach $130 per barrel in the coming weeks, as tensions over energy supply continue. He expressed concern about a potential global economic slowdown, as rising energy and food costs could limit consumers’ spending power.

Brent oil was priced at about $72 per barrel on February 27, the day before the US and Israel struck Iran. On March 18, the price peaked at $119.50, the highest level since June 2022.