U.S. and global oil and gas prices surged higher Monday as concerns grew that attacks by Israel and the U.S. on Iran could spiral into a broader war and disrupt global energy supplies.The U.S. and Israel launched strikes on Iran on Saturday that killed Supreme Leader Ayatollah Ali Khamenei and dozens of other senior government officials while talks between Washington and Tehran over the Islamic Republic’s nuclear program were reported to be ongoing.European benchmark Brent crude oil surged by as much as 13% in early trade on Monday, hitting $82 a barrel, before settling up 6.8% at $77.74 per barrel, while U.S. West Texas Intermediate crude oil rose by as much as 8.8% in the morning and finished the day 6.3% higher at $71.23.Initially, the Islamic Republic launched counterattacks on targets in Israel and U.S. military assets in Bahrain, Saudi Arabia, Iraq, Qatar and the United Arab Emirates.On Sunday, Iranian forces closed the Strait of Hormuz, a vital sea lane which serves as passage for about 20% of the world’s seaborne oil, and attacked oil and gas infrastructure in Isreal, Saudi Arabia, Qatar and Oman with drones and missiles.About 150 ships including tankers carrying oil and liquefied natural gas had dropped anchor in the Strait of Hormuz and surrounding waters on Sunday, according to shipping data reported by Reuters.A rebound in ship traffic through the Strait of Hormuz and the extent of Iranian retaliation will determine the direction of oil prices in the U.S. and globally during the next days and weeks, said Eric Smith, associate director at the Tulane Energy Institute in New Orleans.”A long-term closure of the Strait, like would occur if a ship is sunk in the middle of it, would disrupt exports from the Middle East so that China, India, Japan, Korea and other countries in Asia would then bid up the price of the oil still available in the market because they don’t have any choice,” Smith said. “Almost all the ships carrying oil, LNG and refined products like gasoline produced in the Middle East must pass through the Strait to get to Asia.”The longer Iran keeps the Strait closed to shipping, the higher prices will rise, said Smith.On Sunday, at least one Iranian drone struck Qatar’s Ras Laffan LNG export terminal, the largest of its kind with 77 million tons of annual production capacity and the source of about 20% of global LNG supplies. The LNG facility was shut down indefinitely. In 2025, about 81% of LNG shipped from the terminal went to Asian nations, all of which passed through the Strait of Hormuz.Other Iranian drones struck the Mesaieed crude oil export hub in Qatar and Saudi Arabia’s massive Ras Tanura refinery, both of which were shut down.”It will be a contest to see who has the last drone flying, I think,” said Smith. “The oil and gas infrastructure in Saudi Arabia is most vulnerable to long-term damage caused by Iranian drone and missile attacks, and this is a country that is a major exporter of both crude and refined products.”U.S. wholesale gasoline prices, as reflected by so-called RBOB futures, were up 11 cents per gallon in early trade Monday but settled 4.8% higher $2.3997 a gallon. The price of wholesale diesel fuel rose 12.1 cents Monday or 5.1% to $2.399 per gallon.The European benchmark natural gas price at the Dutch Transfer Pricing Point in the Netherlands settled Monday at €37.45 per megawatt-hour, up 44% on the day.Long-term disruptions to shipping in through the Strait or damage to oil and gas infrastructure in the Middle East would adversely affect low-income consumers in the U.S., who pay a high percentage of their incomes for energy, and farmers, now beginning spring planting, said University of Houston Energy Fellow Ed Hirs.”A doubling of the gasoline price to five bucks a gallon, say, would really hurt lower income consumers,” said Hirs. “And farmers are really taking it on the chin. China isn’t a buyer of U.S. crops lately, the farm bailout is still being withheld by the administration, and an extended conflict in the Middle East could send the send prices of diesel and fertilizer much higher just as they’re beginning planting,” he said.
