Brent Remains Volatile

Brent crude futures traded near $112 per barrel on Monday after climbing to as high as $115 earlier in the session, as investors assessed President Donald Trump’s ultimatum urging Iran to reopen the Strait of Hormuz. Over the weekend, President Donald Trump warned he would “obliterate” major Iranian power plants if the waterway is not reopened to shipping by late Monday. In response, Tehran said it would target US and Israeli assets across the region, including energy, information technology and desalination infrastructure, if its own energy facilities were struck. Oil prices have surged roughly 50% since the Iran war began, as the conflict shows no signs of easing, effectively shutting Hormuz and sharply curbing Middle Eastern oil production. The IEA has cautioned that the global oil market is facing its largest-ever shock despite a substantial release of emergency reserves and US efforts to facilitate the sale of Russian and Iranian oil.

Brent oil prices slipped into negative territory after a modestly higher open on Monday, but remained near $108 per barrel, their highest levels in almost four years as investors were monitoring escalating US and Iranian threats against energy infrastructure. Over the weekend, President Trump warned that he would “obliterate” major Iranian power plants if the Strait of Hormuz is not reopened to shipping by late Monday. In response, Iran’s foreign minister threatened retaliatory strikes on vital infrastructure used by Israel, the United States, and Gulf nations, including power stations, telecommunications networks, and water desalination facilities.

Brent crude oil futures climbed past $110 per barrel on Friday, the highest since mid 2022, as investors monitored the latest escalations in the Middle Eastern conflict. Markets are now pricing in actual supply destruction as Iraq declared force majeure on all oilfields and drone strikes hit Kuwaiti refineries. Meanwhile, President Donald Trump rejected a ceasefire in Iran and expressed confidence the Strait of Hormuz would open itself despite the Pentagon deploying thousands of additional Marines amid weighing plans to seize Kharg Island. Geopolitical risk premiums expanded following drone strikes on refineries in Kuwait and reports of heavy preparations for ground troops. Markets are now discounting a diplomatic resolution and instead preparing for a prolonged disruption to global energy flows. Geopolitical risk premiums expanded despite the IEA releasing 400 million barrels from reserves as plunging tanker traffic outweighed emergency inventory measures.