Global oil prices surged past the critical US$100 per barrel mark Monday as supply disruptions linked to the Iran war intensified, raising fears of a prolonged energy shock that could rattle the global economy.
Benchmark crude prices recorded their biggest one-day jump since 2020, as traders reacted to mounting supply constraints following the closure of the vital shipping route through the Strait of Hormuz, a narrow waterway that carries roughly one-fifth of the world’s oil supply.
Futures for Brent crude surged nearly 30 percent in overnight trading, briefly pushing prices close to US$120 per barrel before easing slightly. By early Monday trading, Brent was hovering around $107 per barrel. Meanwhile, West Texas Intermediate crude, the US benchmark, was trading near $102 per barrel.
The rapid price surge comes as the conflict involving Iran continues to disrupt regional oil flows and prompt production cuts among key Middle Eastern producers.
Market anxiety intensified after reports that major producers Kuwait and the United Arab Emirates had begun trimming output as storage facilities filled rapidly following the disruption to tanker traffic through the Strait of Hormuz. Iraq had already begun reducing production earlier in the week, compounding concerns about global supply shortages.
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The combination of restricted shipping routes and falling output has triggered a wave of panic buying across energy markets.
However, prices stabilised slightly after the Financial Times reported that ministers from the Group of Seven and the International Energy Agency were preparing to discuss a coordinated release of emergency oil reserves in an attempt to calm markets and increase supply.
Even with that possibility, analysts warn that oil prices may remain elevated for some time.
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For weeks, the US$100-per-barrel level had been viewed by economists and investors as a psychologically important threshold that could fuel inflation and slow economic growth. With that level now breached, concerns are growing that the energy shock could ripple through the global economy.
“This oil shock won’t end until ships can sail freely through the Strait,” said market strategist Ed Yardeni.
He warned that prolonged disruption could revive fears of a 1970s-style stagflation scenario a period characterised by high inflation and weak economic growth.
Commodity analysts say restoring supply could take time even if shipping routes reopen soon.
Warren Patterson, head of commodities strategy at ING, said that oil producers would struggle to quickly bring output back online after the disruption.
“With production offline and no clear signs that the conflict is easing, traders are being forced to price in the risk of extended supply disruption,” he said, adding that prices would likely continue climbing as long as oil shipments remain blocked.
Economists warn that sustained oil prices above US$100 could fuel inflation globally and weigh heavily on financial markets.
Jos Torres, senior economist at Interactive Brokers, described the price spike as a potential “true oil shock” that could keep inflation elevated and pressure equities.
Even traditionally optimistic strategists are sounding cautious. Mike Wilson, chief investment officer at Morgan Stanley, has indicated that oil above US$100 could force a downgrade of his outlook for global stock markets this year.
Some analysts say prices approaching US$120 could push the global economy toward recession.
Bruce Richards, chief executive of Marathon Asset Management, warned that such levels would effectively halt economic growth.
“US$120 for Brent means zero growth,” he said. “That’s the trigger for a recession.”
The shock is already spreading through financial markets. The US Dollar Index rose about 0.4 percent as investors sought safety in the US currency, while commodity markets faced volatility.
Gold prices also slipped about 1.4 percent to roughly US$5,097 per ounce as the stronger dollar weighed on dollar-denominated assets.
Equity markets across Asia tumbled sharply at the start of the trading week. Japan’s Nikkei 225 plunged more than seven percent, while South Korea’s Kospi dropped over eight percent.
Elsewhere, Hong Kong’s Hang Seng Index fell around three percent, Taiwan’s Taiex slid more than six percent, and Australia’s ASX 200 declined over four percent.
Asia, which relies heavily on imported energy, is particularly vulnerable to the disruption.
June Goh, a senior oil market analyst at Sparta Commodities, warned that the fallout could last well beyond the immediate crisis.
“Ten days of disruption in the Strait of Hormuz could translate into at least 60 days of pain for energy flows into Asia,” she said.
With the conflict showing little sign of easing, markets now face the prospect of prolonged volatility in oil prices and the broader global economy.
