Oil prices remained firmly higher during European trading on Monday after giving back part of an earlier rally of almost 5%, as renewed military action between the United States and Iran continued to fuel concerns over crude supplies moving through the Strait of Hormuz.
By 03:43 ET (07:43 GMT), Brent crude futures were up 3.5% at $78.68 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 3.5% to $73.89 a barrel. Both benchmarks had climbed close to 5% earlier in the session before easing slightly.
Middle East Escalation Revives Supply Concerns
The latest advance followed a fresh escalation in regional tensions after Iran widened its missile and drone attacks on Sunday to include Gulf states such as Qatar and the United Arab Emirates in response to recent U.S. military action.
Tehran also announced that the Strait of Hormuz had been closed after a commercial vessel was struck, renewing fears over the security of one of the world’s most strategically important oil shipping routes.
Although U.S. officials rejected the claim, President Donald Trump maintained that commercial shipping remained protected and that vessels could continue using the waterway.
Shipping Activity Slows Despite Conflicting Claims
While Washington insisted the Strait remained operational, shipping companies adopted a more cautious approach over the weekend.
According to vessel-tracking data, only six ships passed through the Strait of Hormuz on Sunday, marking the lowest daily traffic in five weeks and highlighting growing concerns over maritime security.
“Shipping operators are adopting a cautious approach and inbound movements have slowed under heightening security concerns,” ANZ analysts said in a note.
Markets Question the Stability of the Ceasefire
ANZ noted that crude prices had surrendered part of last week’s gains after both the United States and Iran initially appeared reluctant to broaden the conflict.
The bank pointed to Washington’s decision not to target Iranian energy infrastructure directly and the start of diplomatic discussions late last week as signs of restraint.
However, the renewed military action over the weekend and Iran’s latest declaration that the Strait of Hormuz was closed have once again raised doubts about the durability of last month’s interim agreement.
Strategic Waterway Remains Critical for Global Oil Trade
The Strait of Hormuz is the primary export route for crude shipments from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates and other Gulf producers.
Any prolonged disruption could force refiners—particularly across Asia—to secure alternative supplies while increasing freight and insurance costs throughout the energy market.
Investors are also watching for any coordinated response from major oil-producing nations or the potential release of strategic petroleum reserves should supply disruptions become more severe.
IEA Warns Supply Recovery Could Be at Risk
Last week, the International Energy Agency (IEA) warned in its latest monthly report that renewed hostilities between the United States and Iran could threaten the expected recovery in global oil supplies if shipping through the Strait of Hormuz remains disrupted.
The agency said worldwide oil supply increased by 4.1 million barrels per day in June after crude exports through Hormuz resumed, although production remained well below levels seen before the conflict.
The IEA expects global supply to continue recovering in 2027, provided shipping through the strategic waterway continues to improve.
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