Oil prices surge as Middle East burns

Mar 03, 2026 News

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(REUTERS) Oil and natural gas prices surged on Monday as Israeli and U.S. strikes on Iran and retaliation by Tehran forced shutdowns of oil and gas facilities across the Middle East and disrupted shipping in the crucial Strait of Hormuz.

A sustained rise in oil prices would threaten a global economic recovery, reignite inflation and could push up U.S. retail gasoline prices, a risky outcome for President Donald Trump and his Republican Party ahead of midterm elections this November.

Brent crude futures rose as much as 13% to $82.37 a barrel, their highest since January 2025, before retreating to trade up $6.27, or 8.6%, at $79.14 a barrel at 1403 GMT. U.S. West Texas Intermediate crude was up $5.05, or 7.5%, at $72.07, having risen more than 12% to $75.33, its highest since June. “The latest move reflects uncertainty around the scale and duration of the current conflict and recognises that Iran’s political future may have major implications for the stability of the Middle East,” said James Hosie of Shore Capital.

Oil’s surge on the restart of trading after the weekend, however, was smaller than expected. On Sunday, some analysts had predicted oil would open above $90 a barrel and closer to $100. Saudi Arabia shut its biggest domestic oil refinery after a drone strike, a source said. Qatar Energy halted production of liquefied natural gas and is set to declare force majeure on LNG shipments and the widening conflict also damaged at least four tankers, killed a seafarer and left 150 ships stranded around the Strait of Hormuz.

The big questions now are how long shipping through the Strait will be disrupted and how much oil importers, especially in Asia, have in storage to endure the disruption. On a typical day, ships carrying oil equal to about one-fifth of global demand sail through the Strait along with tankers hauling diesel, gasoline and other fuels to major Asian markets including China and India. The waterway is also the route for about 20% of the world’s liquefied natural gas.

GAS JUMPS, SUGAR ALSO RALLIES

The Dutch front-month contract at the TTF hub <TFMBMc1, opens new tab>, the benchmark European price, was up more than 50% by 1341 GMT at 48.66 euros per megawatt hour (MWh) on the Intercontinental Exchange. Asian LNG prices jumped almost 39% on Monday with the S&P Global Energy Japan-Korea-Marker (JKM), widely used as an Asian LNG benchmark, at $15.068 per million British thermal units (mmBtu), Platts data showed. World sugar prices rallied around 2% on Monday on fears the conflict and resulting disruption to energy supplies will prompt Brazilian cane mills to produce more ethanol and less sugar.

OIL PRICES PARE GAINS

Oil pared gains after its steep surge in early Asian trade, a move that analysts attributed to buyers already factoring a risk premium into prices in anticipation of the conflict. In the view of the International Energy Agency and other analysts, the oil market is well supplied with additions to supply from producers such as the United States, Guyana and OPEC+ expected to outpace global demand this year. Despite the fears of a glut, Brent had risen over 19% this year until Friday’s close, while WTI was trading about 17% higher.

“Markets are acknowledging the seriousness of the conflict, but are also signalling that, for now, this is a geopolitical shock, not a systemic crisis,” said Priyanka Sachdeva, senior analyst at Phillip Nova. OPEC+ agreed on Sunday to raise oil output by 206,000 barrels per day in April. Every OPEC+ producer is essentially producing at capacity except for Saudi Arabia, RBC Capital analyst Helima Croft said.

The IEA is in touch with major producers in the Middle East, director Fatih Birol said on Sunday. The energy watchdog coordinates the release of strategic petroleum reserves from developed countries during emergencies. Globally, visible oil inventories stood at 7.827 million barrels, enough for 74 days of demand, which is near a historical median, Goldman Sachs wrote in a note.

Citi analysts expect Brent to trade between $80 and $90 a barrel this week amid the ongoing conflict.

A three- to four-week squeeze on Strait of Hormuz traffic could force Gulf producers to shut output and push Brent above $100, JPMorgan said. Analysts are also warning retail gasoline prices in the U.S., the world’s biggest fuel consumer, may break above $3 a gallon because of the conflict. U.S. gasoline futures surged by as much as 9.1% to $2.496 a gallon, their highest since July 2024, and were last up 4.9%.

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• Israeli, Natural Gas, oil, Oil prices, U.S. strikes

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