Amid the ongoing US-Israel campaign against Iran, oil has become one of the key assets watched by market participants.
Since its launch at the end of February, the campaign has continued to influence global financial markets and oil in particular. On Sunday evening, West Texas Intermediate crude oil rose by roughly 30%, reaching $120 per barrel. Over the following hours, the price slid significantly — by about 15% — returning to around $100.
Oil surpassed $100 per barrel for the first time since the beginning of the Russia-Ukraine conflict in 2022, with the rally witnessed being the largest since 1985.
The sharp increase in oil prices is driven by the closure of the Strait of Hormuz, a global oil corridor, by Iran. The strait is of high importance as it carries approximately 20% of global daily shipments, while alternative routes require more time and higher costs. The longer the strait is closed, the greater the emerging supply shock. The closure also resulted in the decline in oil production in the Middle East.
At the same time, the gold price did not see a comparable rise, showing rather muted growth, which is unusual for a traditional safe-haven asset. Entering Monday, S&P 500 and Nasdaq futures fell by roughly 2%, with Dow futures experiencing an over 1,000-point decline. The BTC price was also affected by the oil price surge, resulting in a decline to $65,500 and marking a one-week low. However, over the following hours, the asset recovered to above $67,500.
The gasoline prices also surged, affecting the consumers. The price of a gallon in the U.S. rose by 14% in a week, reaching $3.41 on Sunday. However, the secretary of the U.S. Department of Energy claimed that the rise would not last longer than weeks.
In this context, G7 nations called for an emergency meeting on Monday. The agenda for the meeting was the release of oil reserves. Although no agreement has been reached yet, the option remains open. Should this happen, this would be the first time since the Russia-Ukraine conflict.
This week will bring new data: the February Consumer Price Index on Wednesday and the January Personal Consumption Expenditures index on Friday. Amid the oil rally, the figures carry more significance.
According to Donald Trump’s post on Truth Social, the rising oil prices are a small price to pay for global peace. The timeline for the conflict remains unclear. Initially, the campaign was expected to last from four to five weeks, though later estimates suggested it could extend to as much as six weeks. At the same time, according to the Israeli Prime Minister, the war will last as long as necessary. Therefore, the potential implications of the conflict may not have fully materialized yet.
This article was written in cooperation with TRADINGVIEW