Iran-Israel conflict: Oil up still after swing to 5-month high - why it matters to UAE

Dubai: Oil prices continued to climb on Monday after briefly hitting a five-month high, as the market reacted to the latest escalation in the Israel-Iran conflict.

Prices jumped amid worries that the region’s turmoil could disrupt oil flows, but quickly swung back and forth as traders tried to gauge how bad things could get.

At one point, Brent crude hit $81.40 a barrel, while U.S. crude rose to $78.40—levels not seen since January. Prices cooled off slightly by midday but still ended the session up around 1%.

The surge followed a weekend of dramatic developments: the US joined Israel in launching attacks on Iran’s nuclear facilities, including key sites like Fordow. In response, Iran threatened to expand its list of military targets, calling the US President a "gambler" for intervening in the region.

Iran is OPEC’s third-largest oil producer, so any disruption from the country naturally rattles energy markets. Adding to the tension, Iran warned that the US strikes had widened the scope of its military response, while China said the conflict risked going “out of control.”

For the UAE—where fuel prices are adjusted monthly and influenced by global oil trends—these price swings can impact everything from petrol costs to airfare and shipping over time.

Although domestic supply is secure, global pricing remains closely linked to regional and geopolitical stability. So even if supply hasn’t been disrupted yet, the risk alone keeps markets and consumers watchful.

Despite the drama, oil prices didn’t soar uncontrollably. That’s because actual supply hasn’t been disrupted—yet.

“The geopolitical risk premium is fading, as so far there has been no supply disruptions,” said Giovanni Staunovo, analyst at UBS. “But as it’s unclear how the conflict might evolve, market participants are likely to maintain a risk premium for now. So prices are set to stay volatile in the near term.”

Put simply: Markets are jumpy, but not panicking.

"Monday’s oil spike may have faded somewhat intraday, but the broader trend reflects building pressure on global energy supply chains," said Charu Chanana, Chief Investment Strategist at Saxo Bank.

"Even without a direct shutdown of the Strait of Hormuz, higher shipping costs and insurance premiums could lift energy prices in a more sustained way."

At the heart of the tension is the Strait of Hormuz—a narrow waterway between Iran and Oman, through which 20% of the world’s oil passes. If Iran attempts to block or delay oil tankers, prices could spike instantly.

Goldman Sachs estimates that if half the oil flow through the Strait were halted for a month, Brent could temporarily jump to $110 per barrel.

Still, analysts say a full blockade is unlikely—because Iran also depends on that route to export its own oil. Closing it off would hurt its own economy significantly.

“All eyes remain on the Strait of Hormuz and whether Iran will seek to disrupt tanker traffic,” said Ole Hansen, Head of Commodity Strategy, Saxo Bank. Even a perceived threat could delay shipments and push prices sharply higher, he added.

Oil prices could shoot up again if:

Until then, volatility is likely to continue, with prices bouncing based on headlines, military actions, and diplomatic signals.

Oil prices may not have surged uncontrollably yet, but the mood in the markets is anything but calm. For UAE consumers and businesses, that means keeping an eye on global news, especially involving oil routes like the Strait of Hormuz, even if local supplies remain steady.

Volatility may be the new normal—at least for now.