Oil prices exhibited minimal fluctuations on Monday as investors assessed the implications of U.S. and Iranian threats to target energy facilities. This situation has the potential to escalate the conflict surrounding the release of millions of barrels of Iranian oil at sea into global markets following the lifting of sanctions by Washington. Brent crude futures declined by 8 cents to $112.11 a barrel by 2324, following a settlement at the highest level since July 2022 on Friday. U.S. West Texas Intermediate stood at $98.17 a barrel, reflecting a decrease of 6 cents, following a 2.27% increase in the prior session. The differential between Brent and WTI has surpassed $14 per barrel, marking the most significant gap in years.
Michael McCarthy indicated that the recent decline in oil prices is a temporary phenomenon attributed to low liquidity and short-term profit-taking by traders. Momentum clearly favors further upside, and a test of the recent highs near $120 is a realistic scenario this week,” he added. U.S. President Donald Trump on Saturday issued a stark warning to Iran, stating that he would “obliterate” the nation’s power plants should Tehran fail to completely reopen the Strait of Hormuz within a 48-hour timeframe. This statement marks a notable escalation in rhetoric, occurring just one day after he discussed the possibility of “winding down” the ongoing conflict, which has now entered its fourth week.
Iran’s Parliament Speaker Mohammad Baqer Qalibaf stated on X that critical infrastructure and energy facilities in the Middle East could face “irreversible destruction” if Iranian power plants are targeted. The implication is a further escalation, which suggests an increase in oil prices. “Some are incorrectly thinking, however, that Iran may cave,” said Amrita Sen, founder of Energy Aspects. “Trump is trying to show he can out-escalate and that way ends in scorched earth for Gulf infrastructure.” The conflict has severely impacted significant energy infrastructure in the Gulf, leading to a near cessation of shipping activities through the Strait of Hormuz, a critical passage that accounts for approximately 20% of worldwide oil and liquefied natural gas transportation. Analysts projected a decline in oil production in the Middle East, estimating a loss ranging from 7 million to 10 million barrels per day.
Iraq has invoked force majeure on all oilfields operated by foreign oil companies, according to three energy officials. Iraqi Oil Minister Hayan Abdel-Ghani stated in a ministry announcement that crude production at Basra Oil Company has been reduced to 900,000 bpd from 3.3 million bpd. In an effort to mitigate the supply constraints, Washington has temporarily lifted sanctions on Iranian oil transported by sea. Indian refiners are set to recommence purchases of Iranian oil, while refiners in other parts of Asia are considering a similar strategy, according to traders on Saturday.