The price of oil surged Monday as President Donald Trump signaled that the conflict between the U.S., Israel and Iran would potentially be drawn out for longer than a few weeks, raising concerns that the global energy market would face disruptions as a result.
U.S. crude oil soared more than 7%, while Brent, the international oil benchmark, surged 9%. For U.S. crude oil, the move pushed prices higher by nearly $6 per barrel.
Even before the weekend’s escalation, oil prices had risen 17% this year due to Trump’s recently ramped-up rhetoric against the Iranian regime. The Trump administration has also ratcheted up sanctions on Iran in recent months.
Speaking at the White House on Monday, Trump said the U.S. would continue to execute large scale strikes in Iran. The president added that he expected the conflict to continue on for weeks but it could become a prolonged battle.
“Whatever the time is, it’s OK,” Trump said. “Right from the beginning, we projected four to five weeks, but we have capability to go far longer than that. We’ll do it.”
Prices have already started rising at gas pumps nationwide, according to GasBuddy, a price-tracking service. The national average has risen 5 cents since Sunday to $2.99/gal., GasBuddy’s website showed. “I believe we may see it touch $3/gal later tonight as the jump in prices begins to show up at more stations,” said Patrick De Haan, an analyst for the website, posted on X.
Retail gas prices move about 2.5 cents for every $1 move in the price of crude oil, so even higher prices could be on the horizon for consumers who have been grappling with the high cost of living for the last few years.
“This right now will increase gas prices a little bit, and again, if it’s not prolonged it’s not going to be a major inflationary hit,” JPMorgan Chase CEO Jamie Dimon told CNBC on Monday. “If it went on for a long time, that would be different.”
While Iran’s oil production is estimated to be less than 5% of global output — most of which goes to China because of U.S. sanctions — it has major influence over the Strait of Hormuz, a critical passageway for more than 20% of the world’s daily oil demand.
A closure or restriction there can quickly rock the global oil market, and it would be among the worst-case scenarios for the oil market, longtime industry analyst Andy Lipow said Sunday.
Traffic in the key passageway has already largely come to a halt as container and tanker ship companies become wary of getting caught in the conflict.
On Saturday and Sunday, at least six of the leading cargo shipping companies said they were halting or diverting ships that were originally set to sail through the key waterway.
“Historically, geopolitical oil shocks fade quickly, but if this episode lasts longer, markets may see extended volatility,” Luis Costa, Citigroup’s global head of emerging markets strategy, wrote in a note on Sunday night.
