London: Crude oil prices surged by more than 3% on Monday, driven by renewed geopolitical tensions in the Middle East that have reignited fears over global energy supply disruptions. The sharp rise has once again brought the possibility of oil prices touching the $100-per-barrel mark back into focus, creating uncertainty for global markets and oil-importing nations such as India.

Benchmark Brent crude rose 3.45% to $96.30 per barrel, while US West Texas Intermediate (WTI) crude climbed 3.41% to $93.63 per barrel in early trading hours. This rebound erased most of the losses recorded on Friday, when prices had dipped amid optimism surrounding diplomatic efforts in the region.

Escalation in Middle East fuels rally

The latest surge in oil prices follows renewed hostilities involving Israel and Iran, significantly dampening hopes of a near-term peace agreement. Reports indicate that Israel carried out fresh strikes on Lebanon despite a ceasefire announced earlier this month. In response, Iran launched missile attacks on Israel, escalating tensions further.

These developments have complicated ongoing diplomatic efforts between the United States and Iran. Markets had earlier expected that a ceasefire in Lebanon could pave the way for broader negotiations, potentially easing geopolitical risks and stabilising oil supplies. However, the renewed conflict has shifted market sentiment sharply.

Strait of Hormuz remains a critical concern

At the centre of global energy concerns is the Strait of Hormuz, a vital maritime route through which nearly 20% of the world’s oil supply passes. Any disruption in this narrow waterway, which connects the Persian Gulf to international markets, has immediate implications for global oil prices.

Since tensions escalated earlier this year, Iran has been accused of restricting or threatening shipping movements in the region. Continued uncertainty around the strait has raised fears of prolonged supply disruptions, prompting traders to factor in higher risk premiums.

A sustained disruption could significantly tighten global supply, pushing prices higher and impacting economies worldwide.

Limited impact of OPEC+ production increase

In a bid to stabilise markets, the OPEC+ alliance recently agreed to increase oil production for the fourth consecutive month. However, analysts believe this move is unlikely to significantly offset supply concerns.

Several member nations are struggling to ramp up production due to ongoing geopolitical instability. Additionally, Russia continues to face challenges in maintaining output levels due to infrastructure-related issues.

Experts suggest that in the current environment, geopolitical developments are having a far greater impact on oil prices than supply-side measures. As a result, the effectiveness of production increases remains limited.

Can oil hit $100 again?

The trajectory of oil prices in the coming weeks will largely depend on how the geopolitical situation evolves.

If tensions between Israel, Iran and other regional players intensify, and disruptions in the Strait of Hormuz persist, analysts believe Brent crude could cross the $100-per-barrel mark once again. Such a scenario would likely keep markets volatile and push energy costs higher globally.

On the other hand, any breakthrough in diplomatic negotiations or a sustained ceasefire could ease supply concerns and bring prices down. For now, however, markets appear to be bracing for prolonged uncertainty.

Impact on India and global economy

For India, rising crude oil prices pose significant economic challenges. The country imports over 85% of its crude oil requirements, making it highly vulnerable to global price fluctuations.

An increase in oil prices leads to a higher import bill, which can put pressure on the rupee and widen the current account deficit. It also contributes to inflation by increasing fuel and transportation costs, which in turn affects the prices of essential goods and services.

Key sectors such as aviation, logistics, chemicals and manufacturing are particularly sensitive to rising fuel costs. A sustained increase in oil prices could therefore slow down economic growth and complicate policymaking.

Globally, higher oil prices can dampen economic recovery, especially in emerging markets that rely heavily on energy imports.

Conclusion

The recent surge in crude oil prices highlights the continued influence of geopolitical tensions on global energy markets. While supply-side measures such as OPEC+ production increases offer some support, they remain insufficient in the face of escalating conflicts.

With the Strait of Hormuz at the centre of concerns, the direction of oil prices will depend largely on geopolitical developments in the Middle East. Until stability returns, markets are likely to remain volatile, with the $100-per-barrel mark firmly back in sight.