Global oil prices extended their sharp rally on Monday, climbing more than 2% as escalating tensions in the Middle East and continued disruptions around the Strait of Hormuz rattled energy markets.
Investor sentiment weakened further after reports emerged of an attack on a nuclear power plant in the United Arab Emirates, while US President Donald Trump is expected to review potential military options against Iran during upcoming national security discussions.
At around 7 am IST, global benchmark Brent crude was trading at $111.5 per barrel, up $2.23 or 2.04%, while WTI crude rose $2.54 or 2.41% to $108.0 per barrel.
The latest gains build on last week’s surge, when both benchmarks jumped more than 7%.
Hormuz disruptions keep oil above $100
Oil prices have remained elevated since the United States and Israel launched joint strikes on Iran on February 28. In response, Tehran tightened shipping flows through the strategically vital Strait of Hormuz, through which roughly 20% of global energy supplies transit.
With diplomatic efforts to restore stability in the region failing to make progress, crude prices have continued to trade above the $100-per-barrel mark, compared with earlier levels closer to $70.
Concerns intensified after a series of drone-related incidents involving the UAE and Saudi Arabia, alongside increasingly hostile rhetoric between Washington and Tehran.
According to Reuters, UAE officials confirmed they were investigating a strike on the Barakah nuclear power plant and stated that the country reserved the right to respond to what it described as “terrorist attacks”.
Saudi Arabia also reported intercepting three drones that entered its airspace from Iraq and warned that it would take “necessary operational measures” to safeguard its sovereignty and security.
Fears grow over wider regional escalation
IG market analyst Tony Sycamore said the latest drone incidents signalled the risk of broader instability across Gulf energy infrastructure.
“These drone strikes are a pointed warning — renewed US or Israeli strikes on Iran could trigger more proxy attacks on Gulf energy and critical infrastructure by Iran or its regional proxies,” Sycamore said.
According to Axios, Trump is expected to meet senior national security advisers on Tuesday to discuss possible military action linked to Iran.
Meanwhile, Moody’s Ratings warned that oil-importing countries may increasingly seek bilateral arrangements and coordinated transit corridors to secure energy supplies as instability persists in the Gulf region.
In its latest geopolitical risk assessment, the ratings agency said there was little indication of a durable or near-term settlement between the US and Iran, reducing hopes for a full reopening of the Strait of Hormuz.
“We now expect Brent crude in the USD 90-110/bbl range for much of this year, with significant volatility, including occasional fluctuations outside this range in response to new developments,” Moody’s said.
The agency also warned that persistently elevated oil prices could shave between 0.2 and 0.8 percentage points off real GDP growth across several major economies.
