Oil prices could extend gains when markets open as the US-Israeli war against Iran enters a third week, putting oil infrastructure at risk and keeping the Strait of Hormuz shut in the world’s largest supply disruption.
US President Donald Trump threatened further strikes on Iran’s Kharg Island oil export hub, drawing a defiant response of further retaliation from Tehran.
Brent and US West Texas Intermediate crude futures have already spiked sharply and rattled global financial markets.
Both contracts have surged more than 40 per cent so far in March to their highest levels since 2022 after the US-Israeli attacks on Iran prompted Tehran to halt shipping through the Strait of Hormuz – a key chokepoint for one-fifth of global oil supply.
Trump has urged China, France, Japan, South Korea, Britain and others to deploy warships to secure the strategic gateway.
The US struck military targets on Kharg Island on Saturday, which was swiftly followed by Iranian drone attacks on a key oil terminal in the United Arab Emirates.
“This marks an escalation in the conflict,” JP Morgan analysts led by Natasha Kaneva said.
“Until now, the region’s oil infrastructure has largely been spared.”
Besides UAE’s Fujairah, Saudi Arabia’s Ras Tanura export terminal and Abqaiq oil processing facilities have been listed as critical and highly vulnerable energy nodes in the Gulf, the analysts said.
However, oil loading operations at Fujairah have resumed, a Fujairah-based industry source told Reuters on Sunday.
Fujairah, outside the Strait of Hormuz, is the outlet for about one million barrels per day of the UAE’s flagship Murban crude oil – a volume equal to about one per cent of world demand.
Global oil supply is expected to fall by eight million bpd in March due to disruptions to shipping while Middle Eastern producers have cut output by at least 10 million bpd, according to the International Energy Agency.
On Thursday, the agency agreed to release a record 400 million barrels of oil from strategic stockpiles held by member nations to combat price spikes.
Japan plans to start releasing its oil on Monday, with Tokyo pledging to release a record 80 million barrels – about 45 days of supply for the resource-poor nation.
The government has asked Japan’s refiners to use the released crude, which will reduce the national reserves by 17 per cent, to secure domestic supplies.
Meanwhile, the Trump administration has rebuffed efforts by Middle Eastern allies to start diplomatic negotiations, according to three sources familiar with the efforts, while Iran has rejected the possibility of any ceasefire until US and Israeli strikes end, dimming hopes of a quick end to the conflict.
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