Oil falls nearly 4% as Iran’s retaliation targets regional US military bases

Oil prices experienced a significant decline on Monday, with Brent crude falling 3.8% to $74.09 per barrel and West Texas Intermediate (WTI) dropping 3.8% to $71.06.

This drop followed Iran’s retaliatory strikes on the US military base in Qatar, specifically the Al Udeid Air Base, in response to recent US airstrikes on Iranian nuclear facilities.

Despite the military escalation, there have been no reported disruptions to oil and gas tanker traffic through the critical Strait of Hormuz, which remains a vital artery for global energy supplies.

Focus on Military Targets Limits Immediate Supply Risks

Analysts note that Iran’s retaliation appears deliberately focused on US military installations rather than oil infrastructure or shipping lanes. John Kilduff, partner at Again Capital, emphasized that oil flows are not the primary target at this stage, suggesting a strategic choice to avoid triggering a full-scale energy supply crisis.

This strategy might aim to demonstrate strength while preventing a wider conflict that could significantly affect global oil markets.

Did you know?
The Strait of Hormuz is one of the world’s most strategically important chokepoints, with approximately 21 million barrels of oil passing through daily, roughly 20% of global petroleum liquids consumption. Its security is critical to maintaining stable energy markets worldwide.

Strait of Hormuz Remains a Key Watchpoint

The Strait of Hormuz, through which about 20% of the world’s oil supply passes, remains under close scrutiny. While some supertankers have altered course or paused near the strait following the recent strikes, analysts maintain that the risk of a complete shutdown remains low for now.

However, the region’s volatility keeps the potential for supply disruptions an ongoing concern for energy markets and global economic stability.

Regional Airspace Closures and Flight Disruptions

Qatar closed its airspace in response to the heightened threat environment, while the United Arab Emirates also observed similar restrictions.

Flight tracking data showed numerous diversions and cancellations, reflecting the broader impact of the conflict on regional aviation and logistics.

These measures underscore the escalating security risks faced by civilian and military operations in the Gulf.

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Market and Political Reactions to the Escalation

US President Donald Trump declared that the US had “obliterated” Iran’s main nuclear sites and urged efforts to keep oil prices down despite the conflict.

Trump’s call for increased domestic drilling highlights concerns over potential price spikes amid the Middle East crisis.

Meanwhile, major oil companies such as BP, TotalEnergies, and Eni have evacuated staff from Iraqi oilfields, reflecting precautionary steps in response to regional instability.

While Iran’s retaliation has intensified military tensions, the focused targeting of US bases rather than oil infrastructure has, for now, prevented a direct supply shock.

However, the persistence of geopolitical risks in the Gulf region continues to inject volatility into global oil markets.

Stakeholders must remain vigilant, as any escalation could rapidly alter the energy landscape, impacting prices and economic stability worldwide.