Oil jumps over 5% as Iran and Israel trade strikes for first time since April ceasefire

Hostilities resume

For the first time since the US-backed ceasefire took effect in April, Iran and Israel engaged in an exchange of airstrikes between Sunday evening and Monday morning. Iran launched missiles at Israel on Sunday night, which Tehran described as retaliation for Israeli strikes on Hezbollah targets in Lebanon earlier that day. Israel responded with strikes of its own during the early hours of Monday, and the Israeli army reported a further missile attack from Iran on Monday morning. Iranian media reported explosions in the cities of Tehran, Karaj, Isfahan, and Tabriz.

Israel and Iran must immediately stop 'shooting.'

US President Donald Trump demanded both sides halt military attacks in a Truth Social post. Shortly before the latest strikes, Trump had urged Israeli Prime Minister Benjamin Netanyahu to agree to a future US deal with Iran, telling the Financial Times, "I am in charge. I am absolutely in charge. He is not in charge." Israel ignored Trump's calls for restraint.

Oil price shock

Brent crude futures for August delivery rose more than 5% on Monday morning to $97.83 per barrel. US West Texas Intermediate was up 4.8% at $94.85 per barrel. Brent briefly touched $98 a barrel in early trading. The renewed escalation has revived fears of persistent inflation, with Andreas Lipkow, chief analyst at CMC Markets, noting that those fears are now "back in the market and hitting investors who must decide whether to take some risk out of their portfolios before the summer break."

Strait of Hormuz bottleneck

The Strait of Hormuz remains the focal point of supply concerns. The waterway normally carries about one-fifth of global oil trade volumes, but shipping remains severely restricted. According to a Commerzbank Economic Research report, roughly 13 million barrels per day are missing from the market, equivalent to about 12% of global demand. Only a small portion can be rerouted via alternative paths such as Saudi Arabia's East-West pipeline. The International Energy Agency has drawn down reserves at an unprecedented pace since the conflict began. Earlier this year, Brent had spiked above $120 a barrel, and the partial blockade of Hormuz is considered the largest supply disruption in the history of the global oil market.

Airlines and equities under pressure

Aviation and tourism stocks fell sharply. Airbus and engine-maker MTU dropped as much as 4%, while TUI and Lufthansa shares slid up to 3.8%. Airlines worldwide are grappling with higher fuel costs, kerosene shortages, and airspace closures that force longer routings and higher consumption. The International Air Transport Association (IATA) has nearly halved its industry profit forecast for the year, now expecting a net profit of $23 billion, down from a previous estimate of around $41 billion.

Opec+ supply increase

Seven Opec members and the wider Opec+ group agreed to raise production by about 188,000 barrels per day in July, the fourth consecutive monthly increase. Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman backed the move. Analysts view the increase as largely symbolic, and its impact on global markets is expected to remain limited until transit through the Strait of Hormuz resumes.

European fuel supply

German Transport Minister Patrick Schnieder said he does not expect fuel shortages in Europe despite the renewed attacks. Speaking on the sidelines of a meeting with EU counterparts in Luxembourg, Schnieder stated, "We do not have to fear any physical shortages in Europe at the moment." He welcomed plans for EU countries to share more information on their supply situations.