Oil surges past $90 as US, Iran exchange strikes in escalating Middle East tensions

Oil futures climbed sharply on Monday morning as the United States and Iran traded military strikes for the first time in a month, reigniting fears about disruption to one of the world's most critical energy corridors. By 9:20 a.m. Eastern time, Brent crude had risen 2.20 percent to $90.29 a barrel, while West Texas Intermediate gained 2.25 percent to reach $85.65. The moves sent gasoline prices, already stuck above $4 a gallon nationwide, into uncertain territory.

The escalation began Sunday when US forces struck two Iranian rocket launchers on Larak Island, a strategic position near the Strait of Hormuz. According to Navy Captain Tim Hawkins, a spokesperson for US Central Command, the attack targeted Islamic Revolutionary Guard Corps forces that were preparing to deploy sea mines into the strait—a waterway through which roughly one-fifth of the world's oil supply flows. Iran responded with a barrage of missiles aimed at American forces stationed in Jordan, though nearly all were intercepted with minimal impact on the ground, according to reporting from Fox News.

The timing of the confrontation was particularly consequential because oil markets had only recently begun to stabilize. Goldman Sachs analysts had noted in a report the previous week that Persian Gulf oil exports had recovered to roughly two-thirds of their pre-conflict levels, with tanker traffic through the Strait of Hormuz climbing to between 15 and 16 million barrels per day. That represented a substantial rebound from the 5 to 6 million barrels daily that were moving through the waterway in March, though still well below the pre-war baseline. The investment bank's strategists had suggested this recovery might be sufficient to keep crude prices below the $90 threshold for the remainder of 2026—provided no major disruptions occurred.

Sunday's strikes shattered that assumption. The Islamic Revolutionary Guard Corps confirmed that the attack on Larak Island resulted in casualties, though the organization declined to specify numbers. In a statement to state media, the IRGC vowed that the assault "will be answered by the sons of Iran and will result in the punishment of the aggressor." President Trump, meanwhile, escalated the rhetoric by posting an artificially generated video on Truth Social depicting Iran's Kharg Island energy facility being destroyed, signaling a willingness to intensify the conflict.

The broader energy picture remains precarious. The US Strategic Petroleum Reserve has fallen below 300 million barrels—its lowest level in more than forty years—while the Government Accountability Office has warned that the reserve's operational capacity is increasingly at risk due to aging infrastructure that requires replacement. Beyond crude oil, Goldman Sachs cautioned that liquefied natural gas and refined fuel exports from the Gulf continue to struggle, meaning that even as raw oil supplies show signs of recovery, the downstream energy market remains fragile.

What happens next depends largely on whether Sunday's exchange marks a temporary flare-up or the beginning of a new cycle of escalation. The Strait of Hormuz remains the chokepoint through which global energy security flows, and any sustained disruption to traffic through those waters could quickly erase the supply gains of recent months. Experts acknowledged that the Goldman Sachs forecast of sub-$90 oil prices was predicated on stability—a condition that no longer appears assured.