Oil prices spike as key shipping route disrupted by Iran attacks

Global oil prices have risen sharply after Iran's response to the bid for regime change by the US and Israel disrupted shipping, raising the prospect of a new energy-led surge in inflation.

Early trading in Asia, the first main financial market activity since Saturday morning's airstrikes on Iran, saw the international benchmark Brent crude climb 13% to $82 a barrel - its highest level since July 2024.

It followed a jittery session for oil contracts on Friday when a 1% rise was explained by growing fears that US-Iran peace talks were off track, leaving Brent 8% higher through February.

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The implications of an extended spike in oil prices

For the UK, the rise in oil costs threatens not only notable hikes at the fuel pumps later this month but also a wider lift in costs across the economy at a time when inflation had been forecast to ease sharply, largely on the back of lower energy prices - natural gas.

Last week, the vast majority of financial market participants had expected the Bank of England to cut interest rates at its next rate-setting meeting in just over two weeks' time. That level of confidence may now be in jeopardy given the wealth of uncertainties now pressing on the price outlook due to the war.

Market commentators, however, suggested Monday's oil price spike was likely limited by the fact that some members of the OPEC+ group of oil-producing nations, controlled by Saudi Arabia, had responded to the conflict by pledging a rise in production from next month.

It is not only oil...

Iran's response to Saturday's strikes has seen Gulf states targeted and nearby shipping run for cover. At least three tankers had been damaged by missile and drone strikes, according to news agency reports in the region.

The regime has not yet followed through with ferocity on a pre-war threat to close the key Strait of Hormuz through which around a fifth of the world's oil and natural gas supplies flow, but its attacks involving shipping have effectively created a pause.

The channel accounts for more than 20 million barrels of oil a day, according to the latest annual figures, and the likes of tankers are vulnerable because the strait is just 21 miles wide at its narrowest point - around eight miles, when islands are taken into account.

Maritime shipping in the Gulf - bordering the United Arab Emirates and Iranian coasts - has been shown to have made a dash for anchor in many cases while new sailings appear set to be subject to wartime insurance levels, according to industry experts.

The disruption threatens to raise shipping costs, at least in the short term, and some Europe-bound vessels have been diverted away from the firing line and around Africa, instead of transiting through the Suez Canal.

The longer route can add up to a fortnight to transit times.

No price data was available on Sunday night but the maritime insurance industry news provider Lloyd's List said that approximately 170 containerships in the region had reported delays.

Read more:
Why the Strait of Hormuz is so important
What ship tracking information tells us about Gulf disruption
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Wider financial market movements

Futures information from the brokerage IG suggested the FTSE 100 was set to open down by more than 0.9% after Friday's record close at 10,910. That prediction, made late on Sunday, would be expected to shift in advance of the market open in Europe.

Energy stocks should benefit from higher wholesale prices. Precious metal miners could get a boost too from a rush towards safe havens, with gold for example building on Friday's rise - an increase that came in sympathy with oil.

Kathleen Brookes, research director at XTB, said of the stocks at risk: "Airlines and hotel groups could sell off sharply at the start of this week, as flights are grounded and air space remains closed in the Middle East.

"Holiday bookings over the lucrative Easter period may also start getting cancelled, after reports that Iran launched drones at UK military bases in Cyprus", she wrote.

In Asia, the dollar strengthened in early dealing and took more than half a cent off the pound, to stand just above $1.34 - sterling's lowest level since late January.

There was also support for the safe haven Japanese yen and the Swiss franc.

Another source of safety in troubled times, gold, rose by almost 2%, above the $5,360 per ounce level.

(c) Sky News 2026: Oil prices spike as key shipping route disrupted by Iran attacks