Oil prices surged on Monday amid escalating tensions in the Middle East, triggered by the firing of missiles at Israel by Yemen’s Houthis and remarks from former U.S. President Donald Trump advocating for the seizure of Iranian oil. During early trading in Asia, Brent crude oil futures for May increased by over 3.2%, reaching $116.12 per barrel, indicating a significant monthly rise according to data from LSEG. Meanwhile, West Texas Intermediate futures climbed 3.4%, hitting $102.96 per barrel.
In an interview with the Financial Times, Trump expressed that his preferred strategy regarding Iran would be to “take the oil,” drawing parallels to U.S. actions in Venezuela that allowed the American government to effectively assume control over the nation’s oil sector following the capture of Nicolás Maduro. His comments come amid a protracted conflict involving U.S. and Israeli forces against Iran that has now extended into its fifth week, leading to increased risks for energy infrastructure in the region and contributing to the sharp rise in crude oil prices.
Yemen’s Houthis claimed responsibility for launching missiles at Israel, marking their first direct involvement in the conflict between the U.S. and Israel and Iran. The group’s spokesperson, Yahya Saree, announced the missile attack on sensitive Israeli military targets as a show of support for Iran and Hezbollah in Lebanon. This incident represents a significant escalation, occurring just weeks after U.S. and Israeli airstrikes targeted Iran on February 28.
Ed Yardeni, president of Yardeni Research, commented that global equity markets are beginning to adjust to a prolonged environment of high oil prices and interest rates as the risks associated with the ongoing conflict intensify. He warned that a blockade of the Strait of Hormuz could exacerbate market pullbacks and increase the risk of recession, as uncertainty surrounding the conflict, including the potential for further U.S. involvement, is likely to sustain market volatility until oil flows stabilize.
David Roche, strategist at Quantum Strategy, noted that the markets seem to be anticipating a more aggressive U.S. military response, potentially involving troops on the ground and efforts to seize Iran’s crucial oil export hub at Kharg Island. He cautioned such actions could cut off a primary source of Iran’s dollar revenue but would likely provoke a severe retaliation from Tehran aimed at critical infrastructure across the Gulf.
The heightened tensions also threaten global supply routes, with Roche highlighting the vulnerability of Saudi Arabia’s East-West pipeline, which transports approximately 5 million barrels per day to the Red Sea. Should disruptions occur, particularly at the Bab al-Mandeb chokepoint—where the Houthis operate—exports could be severely constrained, even with alternative routes via the Suez Canal, potentially removing up to 4 to 5 million barrels per day from the global market.
