Crude oil futures (CF) rose to their highest level in eight months on Monday as weekend geopolitical developments in the Middle East stoked supply fears. Talks of the Brent crude oil retesting the $100-a-barrel is doing the rounds amid the escalation in the tensions. The uptrend in the underlying commodity began in the middle of February when the market began speculating a potential military operation in the region following U.S.’s military buildup near Iran.
The speculation proved well-founded when the U.S. teamed up with Israel and launched airstrikes on Iran over the weekend and dropped bombs on Iran’s ballistic missile sites, wiping out its warships, among others
ING economists see the U.S. action as one precipitated by its desire to stall Iran’s nuclear program and also push for a regime change.
How It All Started: The operation, dubbed as “Operation Epic Fury” by the U.S. military, started with the U.S. and Israel beginning major combat operations against Iran, conducting airstrikes against senior commanders and political leaders. Iran’s Supreme Commander Ayatollah Ali Khamenei, aged 86, was killed in the airstrikes. A regional war is brewing in the aftermath of the developments, with Iran appointing a three-person council on Sunday to hold power on an interim basis, before a permanent successor for Khamenei is chosen.
According to AP, Iran has vowed to avenge its leader’s death, and has followed through on its threat by firing missiles at Israel and the Gulf Arab states. With the U.S.-Iran tensions entering the third day, Tehran has ruled out any negotiations with Washington.
Crude’s Strong Run Just Got Reboot: After two down years, crude oil started 2026 on a firm note. The recent geopolitical tensions suggest the oil rally will likely have further legs. Futures tied to the West Texas Intermediate (WTI) grade crude oil have topped $75 before giving back some gains, and the Brent Crude Oil futures (BZ) rose to over $82 before retreating.
The technical chart of CL shows the contract has upside resistance levels around $77.59, $80.6 and $88.10 levels. On the downside, the contract has support around $67.7 and $60.9 levels.
Source: TradingView
Market Implications: Risk-off mood is seen in the financial markets, including the futures market. Iran has reportedly closed the Strait of Hormuz, a major choke point for global energy markets. The strait accounts for 20 million barrels per day (mb/day) of oil trade and more than 100 billion cubic meters (bcm) of LNG per year, according to investment bank ING.
Dutch investment bank Saxo’s Chief Investment Strategist Charu Chanana said oil’s upside may be stickier than typical headline spikes as market prices in both barrels and the cost of moving barrels, including insurance, rerouting, war-risk premia.
The strategist also sees a prolonged impact as the wider Gulf region is impacted. Also, Iran has an incentive to keep oil prices elevated as a form of economic pressure, given energy is one of the fastest transmission into global inflation and sentiment, she added.
As far as the Federal Reserve’s inflation trajectory is concerned, persistently higher oil prices could raise the risk of stickier headline inflation, keeping the central bank cautious about any downward adjustment of rates, Saxo said.
ING said it sees an aggressive price response, forecasting a move in ICE Brent to $80 to $90-a-barrel mark immediately, with the risk of further gains to $100 and even $140 in the eventuality of significant and extended oil supply disruptions.
Much of Iran’s oil is exported from the country’s Kharg Island, and unconfirmed reports suggest that it has been attacked. ING stated that it produces 1.5 mb/day of oil, with much of it going to China.
ING also warned of aggressive moves in European gas and Asian LNG prices due to the risks to Qatari LNG flows and tighter market conditions.
