Crude rallied 9% as US naval blockade of Iran fuels supply alarm

Global crude benchmarks surged on Monday as the United States' announcement of a total naval blockade along the Iranian coastline triggered immediate market panic, effectively neutralizing the previous week’s de-escalation optimism.

The international Brent contract jumped $7.29 (9.59%) to settle at $83.30 a barrel, while US WTI climbed $6.73 (9.42%) to close at $78.14.

Both benchmarks secured their largest daily gains since April, reaching one-month highs as traders aggressively re-priced the risk of imminent transit disruptions in the Strait of Hormuz.

The bullish reversal follows a directive from the US Navy-led Joint Maritime Information Center, which confirmed a blockade covering all Iranian ports and vessels effective Tuesday. Markets are currently pricing in a severe supply shock, with the potential for total maritime closure further exacerbated by retaliatory threats from Tehran and the rejection of proposed transit tolls by international shipping bodies.

Underlying supply vulnerabilities are compounding the volatility. Beyond the Middle East, structural constraints persist: Ukraine continues to target Russian refining infrastructure—most recently in Stavropol and Kavkaz—while maintenance-related production cuts have curtailed Kazakh exports.

With US Strategic Petroleum Reserve levels at 1983 lows, the crude complex has shifted into an acute state of scarcity, signaling significant upward pressure on feedstock and downstream petrochemical margins as supply-chain fragility deepens.

Written by: Aiman Haikal