• Oil prices have surged nearly 5% to their highest levels since January 2025 due to the Iran conflict.
• US and Israeli military actions in Iran are disrupting oil exports, prompting fears of a prolonged crisis.
• Countries like India and Indonesia are seeking alternative energy supplies amid shipping disruptions.

Oil prices saw a significant increase, climbing by 4.7 percent on Tuesday, reaching the highest levels since January 2025. Brent futures closed at US$81.40 a barrel, while US West Texas Intermediate crude settled at US$74.56. The surge was attributed to escalating conflicts between US-Israel forces and Iran, which are disrupting energy shipments from the Middle East. Analysts noted that Brent prices have risen 12 percent since the conflict began, with damages to regional oil production remaining a significant concern.

Additionally, Iraq, the second-largest producer in the OPEC, has cut its production by nearly 1.5 million barrels per day due to a lack of export routes and storage capacities amid ongoing tensions. Iranian strikes against energy infrastructure in the Gulf and threats issued by Iranian media further heightened fears of disrupted shipping lanes through the Strait of Hormuz, a critical passage for global oil transport. The situation has led vessels to avoid the strait following insurance cancellations, which has dramatically increased shipping costs, according to Channel News Asia and Reuters.

Market reactions were further influenced by comments from President Donald Trump, which indicated potential US naval escorts for oil tankers in the Strait of Hormuz. Trump also stated the US would consider providing financial support for maritime trading operations in the Gulf. The prospect of military escorts has created a somewhat stabilized atmosphere around crude price increases. However, doubts linger on whether such measures would be sufficient to restore confidence in secure transport through the region, particularly with the US International Development Finance Corporation being instructed to offer political risk insurance, as mentioned by Dawn and Reuters.

As countries and companies seek alternatives, nations such as India and Indonesia are exploring other energy sources. Additionally, some Chinese refineries have opted to shut down or expedite planned maintenance in response to the volatile market. Recent figures indicate that US crude stocks rose by 5.6 million barrels in the most recent week, significantly surpassing analyst projections and highlighting the ongoing fluctuations in supply and demand dynamics within the market, according to Dawn, Channel News Asia, and Reuters.