Oil prices surged over $4 a barrel on Monday following Israel’s renewed strikes on Iran and Lebanon, occurring in the context of an ongoing ceasefire. The renewed escalation has extinguished hopes for a resolution to the broader regional conflict and heightened concerns regarding the potential resumption of crude shipments through the Strait of Hormuz. Brent crude futures increased by $4.45, representing a 4.9% rise, reaching $97.61 per barrel, whereas U.S. crude futures saw an uptick of $4, or 4.5%, settling at $94.60 per barrel. On Monday, Israel announced that it had executed strikes on a petrochemical facility located in southwestern Iran, in addition to targeting other military installations. This development occurred despite indications that U.S. President Donald Trump had advised Israeli Prime Minister Benjamin Netanyahu to refrain from further military engagements.

The strike represented the inaugural assault on an energy installation within Iran following the ceasefire established on April 8. Israel reported that targets at the Mahshahr petrochemical complex were struck, while a provincial official informed Iran’s semi-official Fars news agency that sections of the facility had incurred damage. The attacks occurred shortly after Trump asserted that new exchanges between Israel and Iran would not disrupt his administration’s ongoing peace negotiations with Tehran. He also asserted that Netanyahu “doesn’t call the shots.” Trump has been urging Israel to cease its operations in Lebanon to facilitate a wider agreement intended to resolve the conflict with Iran. Last week, he reportedly conveyed his frustration directly to Netanyahu during a phone conversation, as renewed military action posed a risk to diplomatic efforts.

The broader conflict has largely remained in a state of suspension since the U.S. and Israel halted their attacks on Iran in early April. However, Tehran has maintained restrictions on the majority of shipping activities in the Strait of Hormuz. In light of ongoing supply disruptions, OPEC+ on Sunday sanctioned its fourth consecutive increase in oil output over the past four months. Analysts, however, indicated that the move is improbable to substantially alleviate market apprehensions, as numerous OPEC+ producers continue to struggle with meeting production targets due to the Hormuz disruption. Haitong Futures indicated that crude prices may approach the upper limit of their trading range, driven by tighter supply-demand dynamics alongside a swift reduction in global oil inventories. Analysts indicated that even in the event of a ceasefire being established, the normalisation of shipping through the Strait of Hormuz could require several months. Any damage to energy infrastructure could further impede the recovery process.

Last month, Saudi Aramco Chief Executive Officer Amin Nasser warned that disruptions in the Strait of Hormuz could delay stability in global oil markets until 2027. He stated that extended disruptions could impact almost 100 million barrels of oil supply on a weekly basis. Saudi Aramco continues to hold the position of the largest oil producer globally. Morgan Stanley characterised the oil market as being in “a race against time,” cautioning that the elements that have thus far constrained a more pronounced increase in crude prices could start to diminish if the Strait of Hormuz remains closed through June. The broking observed that robust U.S. crude exports, coupled with diminished demand from China, have contributed to mitigating a portion of the supply shock. However, it cautioned that an extended closure of the critical shipping route could once again constrict global supplies, especially if the disruption persists beyond the timeframe in which the U.S. and China are able to mitigate the effects.