Oil surges 12% after US-Israel strikes on Iran spark Strait of Hormuz disruption fears. Can prices top $100?

Oil prices surged as much as 12% on Monday to their highest levels in months as Iran and Israel intensified attacks in the Middle East, damaging tankers and disrupting shipments from the crucial oil-producing region.

Brent crude futures climbed to $82.37, the highest since January 2025, in the first trading session after the US and Israel carried out strikes on Iran on Saturday, killing its Supreme Leader, Ayatollah Ali Khamenei. At 0054 GMT, Brent was trading at $78.24 a barrel, up $5.37, or 7.37%.

US West Texas Intermediate (WTI) crude gained $4.66, or 6.95%, to $71.68 a barrel after earlier touching $75.33, its highest level since June 2025.

Israel launched a fresh wave of strikes on Tehran on Sunday, with Iran retaliating with additional missile barrages. The attacks also put commercial vessels at risk, with missiles striking at least three tankers off the Gulf coast and killing one seafarer, shipping sources and officials told Reuters.

Iran said it had shut navigation through the Strait of Hormuz, prompting Asian governments and refiners, key buyers of crude, to review their oil stockpiles.

What does it mean for India?

Domestic brokerage firm JM Financial said brent crude had already climbed to a seven-month high of around $72.8 per barrel amid fears of strikes. Its scenario analysis indicates that limited retaliation could lift prices by $5-10 per barrel; direct damage to Iranian oil infrastructure may add $10-12 per barrel; disruption in the Strait of Hormuz could push crude above $90 per barrel; and a broader regional war could drive prices beyond $100 per barrel. Nearly 20% of global oil flows pass through the Strait of Hormuz, while over 40% of India’s crude imports transit this route, underscoring the country’s significant exposure.
It added that every $1 increase in crude prices raises India’s annual import bill by roughly $2 billion. Prolonged tensions could elevate logistics and marine insurance costs, disrupt Gulf shipping routes, and widen pressure on the trade balance.
The rupee faces a near-term depreciation bias, with potential RBI intervention via foreign exchange reserves. The transmission mechanism is clear: higher crude prices increase inflation risks; elevated inflation pushes bond yields higher; and rising yields compress equity valuation multiples.

If tensions escalate to the point of threatening the Strait of Hormuz, the risk premium could become structural rather than proportional. Even the possibility of partial disruption in this critical chokepoint could add a $20-$40 per barrel geopolitical premium, potentially pushing crude back toward the $95-$110+ range, well beyond the direct mechanical impact of Iran’s supply loss alone, Equirus Securities said in a report.

The International Energy Agency (IEA) said it is closely monitoring developments in the Middle East and remains in contact with major regional producers and IEA member governments, Executive Director Fatih Birol said on Sunday. The agency coordinates the release of strategic petroleum reserves (SPR) from developed nations during supply emergencies.

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