Oil prices spiked near $120 per barrel before falling back

Oil prices con­tin­ued to soar on Mon­day as the Iran war in­ten­si­fied, threat­en­ing pro­duc­tion and ship­ping in the Mid­dle East and pum­mel­ing fi­nan­cial mar­kets.

The price for a bar­rel of Brent crude, the in­ter­na­tion­al stan­dard, surged to as high $119.50 per bar­rel ear­ly in the day but lat­er was trad­ing above $101 per bar­rel, up 9%. West Texas In­ter­me­di­ate, the light, sweet crude oil pro­duced in the Unit­ed States, al­so soared above $119.48 per bar­rel be­fore falling back clos­er to $100.

Oil prices have surged as the war, now in its sec­ond week, en­snares coun­tries and in­fra­struc­ture crit­i­cal to the pro­duc­tion and move­ment of oil and gas. And on Mon­day, Iran named the hard-line Ay­a­tol­lah Mo­jta­ba Khamenei to suc­ceed his late fa­ther as supreme leader, sig­nal­ing a new sign of de­fi­ance by Iran’s em­bat­tled lead­er­ship amid heavy U.S. and Is­raeli bom­bard­ment.

The war’s toll on civil­ian tar­gets grew as Bahrain ac­cused Iran of strik­ing a de­sali­na­tion plant vi­tal to drink­ing wa­ter sup­plies. Bahrain’s na­tion­al oil com­pa­ny de­clared force ma­jeure for its ship­ments af­ter an Iran­ian at­tack set its re­fin­ery com­plex ablaze. The le­gal de­c­la­ra­tion re­leas­es the com­pa­ny of con­trac­tu­al oblig­a­tions be­cause of ex­tra­or­di­nary cir­cum­stances.

The war has dis­rupt­ed oil sup­ply chains in the Per­sian Gulf. Rough­ly 15 mil­lion bar­rels of crude oil — about 20% of the world’s oil — typ­i­cal­ly are shipped every day through the Strait of Hor­muz, ac­cord­ing to in­de­pen­dent re­search firm Rys­tad En­er­gy. The threat of Iran­ian mis­sile and drone at­tacks has all but stopped tankers car­ry­ing oil and gas from Sau­di Ara­bia, Kuwait, Iraq, Qatar, Bahrain, the Unit­ed Arab Emi­rates and Iran from trav­el­ing through the strait, which is bor­dered in the north by Iran.

Iraq, Kuwait and the UAE have cut oil pro­duc­tion as stor­age tanks fill due to the re­duced abil­i­ty to ex­port crude. Iran, Is­rael and the Unit­ed States al­so have at­tacked oil and gas fa­cil­i­ties since the war start­ed, wors­en­ing sup­ply con­cerns.

In re­sponse to soar­ing prices, there have been dis­cus­sions of dip­ping in­to emer­gency oil stock­piles. But on Mon­day, the Group of Sev­en ma­jor in­dus­tri­al­ized pow­ers said it had de­cid­ed against us­ing their strate­gic re­serves, at least for now.

“We’re not there yet,” French Fi­nance Min­is­ter Roland Les­cure said af­ter chair­ing a meet­ing of his G7 coun­ter­parts. Still, he told re­porters in Brus­sels that the group was “ready to take nec­es­sary and co­or­di­nat­ed steps in or­der to sta­bi­lize mar­kets, such as strate­gic stock­pil­ing.”

On Sat­ur­day, Pres­i­dent Don­ald Trump al­so down­played the idea of turn­ing to Amer­i­ca’s Strate­gic Pe­tro­le­um Re­serve, main­tain­ing U.S. sup­plies were am­ple and prices would soon fall.

Yet the surge in costs for oil and nat­ur­al gas is still push­ing fu­el prices high­er, cas­cad­ing through oth­er in­dus­tries and jolt­ing Asian economies that are es­pe­cial­ly vul­ner­a­ble due to the re­gion’s heavy re­liance on im­ports from the Mid­dle East.

Iran ex­ports rough­ly 1.6 mil­lion bar­rels of oil a day, most­ly to Chi­na, which has called for an im­me­di­ate end to the fight­ing. Bei­jing may need to look else­where for sup­ply if Iran’s ex­ports are dis­rupt­ed, an­oth­er fac­tor that could in­crease en­er­gy prices.

“All par­ties have their re­spon­si­bil­i­ty to en­sure sta­ble and smooth en­er­gy sup­plies,” Chi­nese For­eign Min­istry spokesman Guo Ji­akun said in a brief­ing Mon­day. “Chi­na will take nec­es­sary mea­sures to safe­guard its own en­er­gy se­cu­ri­ty.”

South Ko­re­an Pres­i­dent Lee Jae Myung warned Mon­day of strict penal­ties for re­fin­ers and gas sta­tions caught hoard­ing or col­lud­ing on prices, say­ing it would be wise to find al­ter­na­tives to sup­plies that must trav­el through the Strait of Hor­muz.

Across South­east Asia, the spike in prices has led to long lines out­side fill­ing sta­tions.

“High­er oil and gas prices will af­fect every­one and our econ­o­my,” said Le Van Tu, who was wait­ing out­side a gas sta­tion in the Viet­namese cap­i­tal Hanoi. “All ac­tiv­i­ties, in­clud­ing those us­ing petrol based trans­porta­tion will be af­fect­ed.”

South Ko­rea’s Kospi tum­bled 6% to 5,251.87.

The last time Brent and U.S. crude fu­tures trad­ed near the cur­rent lev­el was in 2022, af­ter Rus­sia in­vad­ed Ukraine.

High­er en­er­gy costs push in­fla­tion high­er, strain­ing house­hold bud­gets and dent­ing the con­sumer spend­ing that is a main dri­ver of many big economies. Those wor­ries have spilled in­to fi­nan­cial mar­kets, pulling share prices sharply low­er.

In the U.S., the av­er­age price of a gal­lon of reg­u­lar gaso­line rose to $3.48 as of ear­ly Mon­day, up near­ly 50 cents from a week ear­li­er, ac­cord­ing to AAA mo­tor club. Diesel, used heav­i­ly in ship­ping, sold for about $4.66 a gal­lon, a week­ly in­crease of more than 80 cents.

The price of nat­ur­al gas in the U.S. al­so has climbed dur­ing the war, though not by as much as oil. It was sell­ing for about $3.34 per 1,000 cu­bic feet ear­ly Mon­day. That’s up from Fri­day’s clos­ing price of $3.19.

This sto­ry has been cor­rect­ed to show that the Is­rael-U.S. at­tacks on Iran start­ed Feb. 28, not March 1.

Kurten­bach re­port­ed from Bangkok. As­so­ci­at­ed Press jour­nal­ist John Leices­ter con­tributed from Paris.

By ALEX VEIGA and ELAINE KURTEN­BACH