Brent oil prices jump 5% on rising tensions over Strait of Hormuz

Brent oil prices surged more than five per cent on Monday amid intensifying tensions over the Strait of Hormuz, after Emirati authorities said an energy installation had been struck by a drone.

At around 1535 GMT, Brent crude futures rose 5.2% to $113.78 a barrel, while US benchmark West Texas Intermediate gained 3.1% to $105.11 a barrel.

Stocks mixed after US disputes Iran

US stock markets were mixed, with the Dow Jones Industrial Average down 0.5%, the S&P 500 slightly lower, and the Nasdaq Composite edging up 0.12%.

Iranian state media reported that its navy had prevented “American-Zionist” warships from entering the Strait of Hormuz, while the Fars News Agency said missiles struck a US warship near Jask in the Gulf of Oman. Reuters could not independently verify the reports.

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The US military said two US Navy guided-missile destroyers had entered the Gulf to counter an Iranian blockade, and that two US ships had transited the Strait.

Iranian warning to US forces

Iran’s military earlier warned US forces against entering the Strait after President Donald Trump said Washington would assist ships stranded due to the US-Israeli conflict with Iran.

Analysts cautioned that elevated oil prices may not be sustainable due to their impact on demand and economic growth.

“The market is being pulled in two opposing directions right now: on one hand, geopolitical risk is pushing oil higher and reviving inflation fears, but on the other, underlying growth, especially in the US, is clearly softening,” said Bruno Schneller of Erlen Capital Management.

Global equities showed mixed trends. MSCI’s index of shares outside Japan rose, led by Asian markets, with South Korean stocks gaining over 5% and Hong Kong’s Hang Seng index up 1.2%.

In Europe, the STOXX 600 index fell 0.6%, weighed down by carmakers after the US signalled higher tariffs on European vehicles.

Central banks warn of inflation risks

Rising oil prices have fueled inflation concerns, pushing bond yields higher and complicating central bank policy outlooks.

Markets no longer expect the US Federal Reserve to cut rates this year, while rate hikes are being priced in for the European Central Bank and Bank of England.

Barclays joined other brokerages in predicting no Fed rate cuts in 2026.

Upcoming data, including Friday’s US payrolls report, could influence expectations.

Forex markets on alert

Currency markets remained volatile, with traders watching for possible Japanese intervention to support the yen.

The dollar was broadly steady against the yen at 156.98, after earlier falling sharply. Analysts estimate the recent intervention could have totalled around $35 billion.

The euro slipped slightly to $1.17, while sterling edged lower to $1.356. The dollar index rose 0.11%.

Gold prices fell more than 1% to $4,565 an ounce.