Oil rockets past $100 as Hormuz shipping freeze chokes global supply

Dubai: Oil prices surged above $100 a barrel after a halt in tanker traffic through the Strait of Hormuz began choking global supplies, pushing energy markets into one of their sharpest rallies in years.

Brent crude climbed about 11% to trade near $103 a barrel after briefly approaching $120 earlier in the session. The jump places crude on track for its biggest daily gain in dollar terms since futures trading began in 1988.

Energy markets reacted to mounting supply disruptions across the Middle East, where several major producers have begun cutting output after storage facilities filled and tankers became stranded following the shutdown of shipping routes through Hormuz.

The narrow waterway normally carries roughly one fifth of global oil flows and serves as a critical export route for Gulf producers. The near standstill in tanker traffic has forced producers to scale back output while global markets scramble to secure supplies.

Prices retreated slightly after reports that Group of Seven finance ministers could discuss a coordinated release of emergency oil reserves to stabilise markets.

Production shutdowns are beginning to spread across the region as the disruption to shipping continues.

Iraq began shutting in output last week while Kuwait and the United Arab Emirates followed with production cuts over the weekend as storage facilities filled rapidly.

Analysts estimate that the region could see a sharp escalation in supply disruptions if the shipping standstill continues.

According to analysts at Julius Baer, Middle East production shut ins could exceed four million barrels a day within days if bottlenecks persist and storage capacity remains constrained.

Saudi Arabia has attempted to keep supply flowing by offering crude cargoes through unusual spot tenders, including shipments routed through alternative locations outside the Persian Gulf.

The oil rally has been driven largely by fears surrounding the Strait of Hormuz, where shipowners have become increasingly reluctant to send vessels through the area amid escalating military risks.

One tanker appears to have crossed the strait recently with its satellite tracking signal disabled, though most commercial shipping companies remain unwilling to risk the passage.

Oil markets are now grappling with the possibility that the disruption could extend beyond shipping and trigger broader supply losses.

Economists say the conflict is already shifting investor expectations and raising the possibility of broader economic consequences if energy prices remain elevated.

Mark Matthews, Head of Research Asia, said investors initially expected the conflict to be brief but sentiment has shifted sharply.

“When the 2026 Iran war started on February 28 there was considerable hope it would be short,” Matthews said. “But the conflict has not yet ended and investors have become more pessimistic, thinking that it could last for several months and have an impact on real economies.”

The oil spike has revived comparisons with historical energy crises that triggered recessions and inflation shocks across global markets.

However, analysts say the world economy today is less dependent on oil than it was during earlier crises, which could soften the long term impact.

Commodity analysts say current price moves reflect a mix of supply concerns and heightened market sentiment.

Norbert Rücker, Head of Economics and Next Generation Research, said markets have entered a period of extreme sensitivity to geopolitical developments.

“Oil markets have entered panic mode. Prices surged into the triple digits as the Iran war raises stress levels,” Rücker said.

Shipping disruptions have already created a backlog of cargo vessels waiting to leave the Persian Gulf, gradually turning logistical congestion into actual production cuts.

Higher oil prices are also testing the resilience of global financial markets.

Mathieu Racheter,Head of Equity Strategy Research, said crude briefly approached $120 before easing after policymakers signalled possible intervention through strategic reserve releases.

“Oil prices surged above $100 per barrel over the weekend amid Middle East tensions,” Racheter said.

Persistent prices above $100 could increase inflation risks and tighten financial conditions, forcing investors to adopt more defensive strategies.

Equity markets have already begun adjusting portfolios as energy costs rise, with analysts recommending increased exposure to energy producers while reducing exposure to sectors most sensitive to fuel prices.

Energy markets remain highly sensitive to developments in the Middle East, with the reopening of shipping routes through the Strait of Hormuz likely to determine whether the current price surge proves temporary or develops into a deeper supply crisis.

- With inputs from Bloomberg.