Global oil prices remained above the $100-per-barrel threshold on Monday as escalating tensions in the Middle East continued to disrupt energy markets. The conflict involving Iran has intensified in recent days, with attacks targeting key oil infrastructure and shipping routes, fueling concerns about the most severe energy crisis since the 1970s.

Futures for Brent crude, the global oil benchmark, held above $100 per barrel, while U.S. benchmark West Texas Intermediate traded above $96.50 after briefly crossing the $100 level late Sunday. Market volatility has surged as traders attempt to assess the potential duration and economic impact of the conflict.

Energy Infrastructure Under Threat

Recent military activity has directly targeted critical oil infrastructure across the Gulf region. Over the weekend, U.S. strikes hit several military assets on Kharg Island, Iran’s primary oil export hub, signaling the potential for further attacks on energy facilities if the conflict escalates.

At the same time, Iranian drone strikes have disrupted oil operations elsewhere in the region. Attacks targeting infrastructure near the port of Fujairah in the United Arab Emirates temporarily halted oil loadings, raising fears that supply disruptions could spread across key export terminals in the Gulf. These developments have heightened concerns that the conflict could significantly reduce global energy supply if the situation worsens.

Strait of Hormuz Disruptions Intensify Supply Risks

One of the most significant factors driving oil prices higher is the effective closure of the Strait of Hormuz, the narrow maritime corridor that carries roughly one-fifth of the world’s daily oil shipments.

Most commercial tanker traffic has halted, with only a limited number of vessels managing to transit the route over the weekend. The shipping disruption has pushed freight rates and insurance costs sharply higher for vessels operating in the region.

Efforts by U.S. officials to build an international coalition aimed at reopening the shipping lane have so far yielded few concrete commitments from allied governments, leaving markets uncertain about when normal trade flows might resume.

Oil Forecasts Rising Amid Supply Constraints

As supply risks intensify, analysts are revising their oil price forecasts upward. Morgan Stanley recently raised its forecast for the second quarter, projecting average oil prices of around $110 per barrel, significantly higher than its previous estimate of $80.

For the third quarter, the bank now expects average prices near $90 per barrel, reflecting ongoing concerns about supply disruptions even if some shipping routes reopen.

Analysts describe the current situation as a precarious balance between supply shocks and uncertain geopolitical developments. “The result is a high-stakes stalemate that markets are struggling to price,” said Capital analyst Daniela Hathorn in a client note.

Central Banks Confront New Inflation Risks

The surge in oil prices is also complicating the outlook for monetary policy across major economies. Central banks including the Federal Reserve, the European Central Bank, and the Bank of England are widely expected to keep interest rates unchanged at upcoming policy meetings as they evaluate the economic consequences of the energy shock.

Higher oil prices could push inflation upward in the near term while simultaneously slowing economic growth. As a result, policymakers are expected to adopt a cautious stance until the trajectory of energy markets becomes clearer.

In the United States, rising oil prices have already influenced financial markets. Treasury yields have climbed as investors reassess expectations for near-term interest rate cuts, reflecting fears that elevated energy costs could reignite inflation pressures.

Markets Grapple With Uncertain Economic Impact

Despite rising energy prices, global financial markets have so far shown limited signs of panic. U.S. equities remain relatively close to recent highs, and the U.S. dollar has strengthened in recent sessions.

However, some economists warn that markets may be underestimating the risk of a broader economic slowdown if the conflict persists. Bank of America economists noted that while investors appear to expect a temporary shock, a prolonged disruption to energy supply could have more serious consequences for global growth.

The coming weeks will likely determine whether the current surge in oil prices proves to be a short-lived geopolitical spike or the beginning of a more sustained global energy shock.