Oil Prices Surge Over 20% in a Month Amid Iran Conflict, Highest Gain Since March

International oil prices closed up over 1% on Friday (31st), recording their strongest monthly performance since March. Brent crude futures rose 1.09 USD or 1.2%, closing at 90.12 USD per barrel; U.S. West Texas Intermediate (WTI) crude futures gained 1.08 USD or 1.3%, ending at 84.67 USD per barrel. During July, Brent surged 24% cumulatively, while WTI rose 21%.

The market strengthened due to ongoing military tensions in Iran disrupting global crude oil transportation. Since the conflict erupted on February 28, shipping through the Strait of Hormuz has been significantly obstructed. This waterway previously carried about one-fifth of the world’s crude oil and natural gas, affecting millions of barrels of daily supply from the Middle East.

Iran has severely restricted passage through the strait, with reports that the Revolutionary Guard blocked two oil tankers from passing, while four others rerouted. According to Fars News Agency, shipping activity noticeably declined after the incidents. Kpler data showed two ultra-large crude carriers still passed through on Friday, but overall traffic remained low.

Meanwhile, Yemen’s Houthi militants are threatening shipping at the southern end of the Red Sea near the Bab el-Mandeb Strait, putting alternative export routes for countries like Saudi Arabia at risk. On Thursday, 29 cargo vessels still passed through the strait.

Ole Hvalbye, analyst at SEB Research, noted that the market has shifted from 'trading war' to 'trading shipping data,' indicating investors are focusing more on actual supply flows.

Geopolitical risk premiums continue to support oil prices. Research firm Gelber & Associates pointed out that risk premiums at critical nodes like the Strait of Hormuz remain, while U.S. crude inventories have dropped to multi-year lows. Data from the U.S. Energy Information Administration (EIA) shows U.S. commercial crude inventories have fallen to their lowest level since 2018.

Additionally, drone attacks that set fire to two LNG carriers at Egypt’s Damietta port have heightened market concerns over shipping safety in the Suez Canal. Saudi Arabia has stated it is seeking to lead a coalition to strengthen defense cooperation in the Bab el-Mandeb Strait, Red Sea, and Gulf of Aden.

On the supply side, Kazakhstan’s Tengizchevroil has resumed crude oil exports via Georgia’s Batumi port, the first time since March. U.S. crude production in May declined about 2% from April’s record high, but exports hit a new record for the second consecutive month.

However, high oil prices are dampening demand. EIA data shows U.S. crude and petroleum product demand in May dropped over 3.5% to approximately 20.07 million barrels per day, the lowest since March 2025.

On the supply outlook, Baker Hughes reported that U.S. energy firms added drilling rigs for the sixth consecutive week, suggesting future output may rebound. Market surveys also indicate most analysts expect oil prices to remain on an upward trend this year, with the 2026 average Brent price forecast raised to 85.22 USD.

Overall, geopolitical risks, shipping disruptions, and declining inventories are jointly driving oil prices higher, and the market will remain highly dependent on Middle East developments and actual supply data changes in the short term.