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.
Stocks also sharply dropped at the opening of trade on Monday, although the declines moderated by the time trading ended for the day. The broad S&P 500 ended the day about flat and the tech-focused Nasdaq Composite rose slightly by 0.3%. The Dow Jones Industrial Average dropped 73 points.
The Russell 2000 index, which tracks smaller companies, finished the day higher by 0.8%.
Stocks faced steeper losses across Europe and Asia. The pan-European Stoxx 600 closed down 1.7% and Germany's DAX plunged 2.5%. France's benchmark stock index slid 2.2%, and Italy's 2%. Japan's Nikkei stock index also ended lower by 1.4% overnight.
The U.S. Dollar Index rose 1%, and the price of precious metals rose, with gold futures jumping 2% or more than $100, an indication that investors and traders are flocking to "safe haven" assets in the wake of the conflict.
"The scale [of Iran’s retaliation] has been a big, big surprise," Jorge León, head of geopolitical analysis at Rystad Energy, told NBC News on Saturday. "This is a totally different world from what the market was anticipating."
On Sunday, eight oil-rich nations that are part of OPEC+ said they planned to increase production by more than 200,000 barrels of oil per day starting next month in a move aimed at calming markets.
For prices to fall, the market will most likely need tensions to ease.
"The trajectory of oil prices will ultimately depend on four variables," JPMorgan Chase analysts said in a note Sunday. Those factors are how much supply is disrupted, how long a disruption lasts, whether supply from other sources can be mobilized quickly and what comes next.
Crude oil may not be the only commodity affected.
“While much of the focus is on crude oil, Qatar is the second largest exporter of [liquified natural gas] behind the USA,” Lipow wrote in a note. “LNG tankers are also being diverted away from the region,” he added. "A disruption in LNG would result in higher natural gas prices, especially in Europe."
On Monday, Qatar's state-run energy company said it would pause liquid natural gas production "due to military attacks on QatarEnergy’s operating facilities." The firm did not provide a timetable for resuming output.
Natural gas prices in the U.S. jumped about 5% on Monday morning but in Europe natural gas futures rocketed higher by 45% on the news.
