Oil prices jumped sharply on Monday, climbing to their highest level since mid-2022 as the worsening conflict involving Iran raised fears of major disruptions to global energy supplies.
Brent crude surged nearly 25 percent during the day, putting it on course for the biggest single-day rise on record. Prices briefly reached about $119.50 per barrel, while US West Texas Intermediate also climbed close to $119.48 a barrel.
The sudden rise in oil prices sent shockwaves through global markets. Investors are worried that the conflict could limit oil supplies from the Middle East, a region that produces a large share of the world’s crude.
At the same time, gold prices dropped more than 2 per cent. The fall came as the US dollar strengthened, making gold more expensive for buyers using other currencies.
Oil rally lifts food and agriculture markets
The surge in crude oil also pushed up prices in agricultural markets. Edible oils, which are widely used to produce biofuels, rose strongly as traders followed the sharp move in energy markets.
Malaysian palm oil climbed about 9 per cent, while soybean oil in Chicago reached its highest level since late 2022. Grain markets also moved higher. Wheat prices rose to their strongest level since June 2024, and corn touched a 10-month high.
Analysts say the link between oil and vegetable oils often becomes stronger when energy prices rise quickly. Higher crude prices can increase demand for biofuels, which in turn pushes up the price of the vegetable oils used to produce them.
Conflict fears shake market confidence
Market watchers say the reaction reflects growing concern that the crisis could drag on.
Tony Sycamore, a market analyst at IG, said investors are struggling to see a clear path towards easing tensions.
He said markets are facing a high-risk situation where neither side appears ready to back down. As the conflict continues, the risk of wider economic damage is rising.
The situation took another turn after Iran named Mojtaba Khamenei as the successor to Supreme Leader Ali Khamenei. The move signalled that hardline leadership is likely to remain in place as the conflict involving the US and Israel enters its second week.
Supply fears push metals and oil higher
Oil prices were also driven by reports that some Middle Eastern producers have started reducing supply. Concerns are also growing over possible disruptions to shipping through the Strait of Hormuz, one of the world’s most important routes for oil transport.
Analysts at ING said the situation appears to be worsening. They noted that some producers are facing storage limits and have started shutting in production. Countries such as Iraq, Kuwait and the UAE have reportedly begun cutting output.
In the metals market, aluminium rose sharply due to supply worries linked to the conflict. Prices on the London Metal Exchange climbed to about $3,544 per ton, the highest level since March 2022.
Major producers in the region have already started taking precautionary steps. Qatari smelter Qatalum and Aluminium Bahrain have declared force majeure on shipments because of rising tensions.
Other base metals did not see the same gains, as the stronger US dollar made them more expensive for international buyers.
For now, traders say global markets are likely to remain volatile as investors watch closely for any signs of further escalation in the Middle East.
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