Brent crude prices have surged to $108.77 per barrel, the sharpest daily increase since the Covid-19 pandemic began in 2020, adding to last week’s 28 percent rise.
The prices increased past $100 per barrel on Sunday, the first time since Russia’s 2022 invasion of Ukraine.
The spike is driven by the ongoing US-Israeli-Iran conflict which has nearly shut down traffic through the Strait of Hormuz, as Iranian forces continue targeting vessels attempting to cross.
Bruce Kasman, chief economist at JPMorgan, explained that the global economy remains heavily reliant on the flow of Middle Eastern oil and gas through the strait.
He predicted a short-term climb toward $120 per barrel, followed by some easing if the fighting subsides. However, without a clear political resolution, he expects Brent crude to stabilise around $80 per barrel through mid-year.
Kasman warned that this scenario could trim global growth by 0.6 percent in the first half of the year and raise consumer prices by about 1 percent. If the war expands and drags on, oil prices could soar past $120, raising the risk of a worldwide recession.
In a social media post, US President Donald Trump downplayed the spike, calling it a “small price to pay” for global safety and peace, and predicted prices would fall once the Iran nuclear threat was eliminated. Trump posted on Truth Social on Sunday.
He said, “Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!”
Fears over the war in Iran have driven oil futures and gasoline costs sharply higher, with traders worried about long-term disruptions to global supply. Iran has threatened to strike any tanker crossing the Strait of Hormuz, a route that carries 20 percent of the world’s oil.
US oil futures jumped 18 percent to about $108 a barrel, briefly touching $110, while Brent crude rose 16 percent to nearly $108. Analysts warn prices could climb to $150 by March if shipping through the strait remains blocked.
The surge has rattled financial markets, with Dow futures dropping over 800 points and S&P 500 and Nasdaq futures falling 1.6 percent. Gasoline prices in the US averaged $3.45 a gallon, up 16 percent in a week.
Economists caution that prolonged high energy costs could fuel inflation, strain household budgets, and create political challenges for Republicans ahead of the midterm elections.
