Oil prices surged in the international market to their highest levels since January on Monday, following the United States’ participation in airstrikes on Iran’s nuclear facilities over the weekend, escalating tensions in the Middle East, and fuelling concerns about potential supply disruptions.
Brent crude futures rose by $1.92, or 2.49 per cent, to $78.93 a barrel as of 0117 GMT. US West Texas Intermediate (WTI) crude climbed $1.89, or 2.56 per cent, to $75.73. Earlier in the session, both benchmarks had jumped over 3 per cent, reaching $81.40 and $78.40 respectively—levels last seen five months ago—before easing slightly.
Iran is the third-largest oil producer within the Organisation of the Petroleum Exporting Countries (OPEC). Traders are now closely watching for possible retaliation, particularly a potential move to block the Strait of Hormuz—a critical chokepoint through which about 20 per cent of global oil supply passes.
Iran’s state-run Press TV reported that the Iranian parliament had approved a measure to close the strait, though Iran has previously issued such threats without acting on them.
“The risks to oil infrastructure have significantly increased,” said June Goh, senior analyst at Sparta Commodities. She noted that although alternative pipelines exist, they cannot fully compensate for the volumes currently shipped through the strait. Many shipping companies are likely to avoid the region amid rising tensions, she added.
In a note published Sunday, Goldman Sachs warned that Brent crude could spike to $110 per barrel if oil flows through the strait were reduced by half for a month. The bank projected prices would remain around 10 per cent lower than normal for nearly a year afterward. However, it maintained that no major supply disruptions were expected, citing global efforts to prevent prolonged outages.
Since the conflict escalated on June 13, Brent has gained 13 per cent, while WTI is up about 10 per cent.
Despite the sharp rise in prices, analysts noted that the current geopolitical risk premium may fade unless there is a clear and sustained disruption to oil supplies. Additionally, some analysts believe profit-taking from recent long positions may limit further gains.
Possible Impact on Prices in Pakistan:
Based on the recent surge in global oil prices driven by the US airstrikes on Iran and rising tensions in the Middle East, petroleum prices in Pakistan are expected to increase notably in the upcoming fortnightly review.
Brent crude has climbed to nearly $79 per barrel, with intra-day spikes crossing $81—the highest levels since January. Given that Pakistan imports a significant portion of its oil needs, such price hikes in the international market typically translate into higher domestic fuel prices.
Analysts estimate that if current rates hold, petrol and diesel prices in Pakistan could rise by Rs8 to Rs12 per litre, depending on exchange rate fluctuations and government tax adjustments. Any further escalation, particularly disruption at the Strait of Hormuz, could push prices even higher.
If Brent crude spikes to $110 per barrel due to a disruption at the Strait of Hormuz, petroleum prices in Pakistan could see a sharp increase of Rs25 to Rs35 per litre. Given Pakistan’s heavy reliance on imported oil, the spike would also drive up transport and electricity costs, fuelling inflation across various sectors.
