Oil prices jumped more than 4% on Monday after the US and Iran exchanged another round of attacks, reviving fears that energy shipments through the Strait of Hormuz could face deeper disruption.
Yet the waterway has not stopped functioning. Iran says it is closed, while the US insists commercial traffic is moving and vessel-tracking data show ships are still crossing, albeit at sharply reduced levels.
The market is therefore pricing a growing risk of lost supply rather than a confirmed, enforceable shutdown of the world’s most important oil chokepoint.
The US military said it struck about 140 Iranian targets over the weekend, including missile sites, drone facilities, ammunition depots, communications equipment and naval infrastructure.
It was a far heavier operation than the previous two rounds of US strikes during the past week.
Iran retaliated with missile and drone attacks aimed at US-linked facilities across Bahrain, Kuwait, Qatar, Jordan, Oman and the United Arab Emirates.
The latest exchange followed an attack on the Cyprus-flagged container ship GFS Galaxy, which was disabled while travelling through the strait along a route close to Oman.
The escalation has further weakened the memorandum of understanding signed by Washington and Tehran on June 17.
That agreement extended the ceasefire for 60 days, sought to restore shipping and was intended to create room for negotiations over Iran’s nuclear programme and sanctions.
But the truce began unravelling in early July after commercial ships were attacked and the US Treasury revoked a temporary waiver permitting Iranian oil sales.
IG Australia analyst Tony Sycamore told Al Jazeera that the agreement was “deliberately vague” on who would control the strait and manage shipping traffic.
Brent crude climbed 4.1% to $79.11 a barrel during Asian trading on Monday, while West Texas Intermediate gained 4.1% to $74.37.
The international benchmark had fallen as low as $70.14 recently as traders became more confident that Gulf production and shipping flows were recovering.
The latest move was not confined to energy markets.
Two-year US Treasury yields rose to 4.2393%, their highest since early 2025, while the dollar strengthened.
Futures markets increased the amount of Federal Reserve tightening expected by the end of the year.
That reaction suggests investors are worried about renewed inflation, not simply a temporary jump in fuel prices.
More expensive crude raises transport and manufacturing costs, potentially complicating the outlook for central banks just as US inflation figures and Federal Reserve Chair Kevin Warsh’s congressional testimony come into focus.
Saul Kavonic, head of energy research at MST Financial, told Al Jazeera that prices were likely to remain elevated while conditions in the strait remained hazardous and releases from emergency oil reserves began winding down.
Kavonic warned that Iran was seeking to cement its influence over the waterway, potentially keeping traffic below half of pre-war levels for months and producing periodic flare-ups.