Oil rallies 2% as US-Iran strikes disrupt Hormuz traffic
Renewed military clashes between the United States and Iran have driven crude prices higher, threatening a vital global energy chokepoint and boosting revenue prospects for producing nations.
Brent crude futures climbed $1.67, or 2.2%, to $77.68 a barrel by 09:55 GMT on Monday, while U.S. West Texas Intermediate gained $1.59 to $73.00. The pricing jump followed weekend hostilities that renewed fears of major supply disruptions in the Middle East.
Iran's Revolutionary Guards claimed responsibility for attacks on U.S. military bases in Kuwait and Bahrain, prompting Tehran to announce the closure of the Strait of Hormuz. The narrow waterway handles roughly one-fifth of global daily oil and liquefied natural gas exports. Physical market indicators already reflect the tension, with ship-tracking data from Kpler showing only six vessels transited the strait on Sunday, marking a five-week low.
U.S. President Donald Trump disputed the closure, stating the route remains open to commercial traffic despite the military escalation. “It’s open, and I don’t want to talk about it, because I want to honor the life of Lindsey Graham,” Trump said in an interview, later adding, “It’s open, we bombed the hell out of them last night, they’re very, very evil and sick people.”
The strikes undermine an interim agreement signed by Washington and Tehran last month, which was designed to reopen the strait and initiate a 60-day negotiating period. Trump claimed Iran had already agreed to a comprehensive deal before the sudden escalation. “We had meetings with them… they agreed to a deal yesterday, a perfect deal for us. No nuclear, no this, no that, no nothing. They gave up everything and then after that they left the room and then within an hour they launched a drone at a ship.”
Pipeline expansion to curb future risk
For energy investors, the immediate supply shock highlights a longer-term structural shift in Middle East infrastructure. Analysts at Goldman Sachs noted that planned pipeline projects could eventually allow more than 60% of Gulf oil exports to bypass the Strait of Hormuz entirely. The bank projects alternative pipeline capacity will grow by 3.8 million barrels per day by late 2027 and a cumulative 7.3 million barrels per day by the end of 2028. This would lift the region's effective bypass capacity beyond 14 million barrels per day, providing markets with greater resilience against future geopolitical disruptions.
Demand shifts and Nigerian windfall
Despite the broader price rally, not all producers are capitalizing. Iranian crude faces headwinds as floating storage volumes rise following a production surge during the recent peace, with Chinese independent refiners opting for cheaper crude from Iraq, the UAE, and Qatar. Meanwhile, the Abu Dhabi National Oil Company slashed its August official selling price for benchmark Murban crude to $80.01 per barrel, down sharply from $101.48 the previous month.
The elevated global pricing environment, however, arrives as Nigeria posts its strongest crude production performance in six years. The Nigerian Upstream Petroleum Regulatory Commission reported June 2026 output averaged 1.56 million barrels per day, exceeding the country's 1.5 million barrel OPEC quota to hit 104% compliance. Including condensate, total production reached 1.735 million barrels per day, positioning the government for a significant revenue boost as long as Middle Eastern tensions persist.
