Oil prices spiked near $120 per barrel before falling back Monday as the Iran war intensified, threatening production and shipping in the Middle East and pummeling financial markets.
The price for a barrel of Brent crude, the international standard, surged to $119.50 per barrel early in the day but later was trading near $106 per barrel, up 14%, before the opening bell.
West Texas Intermediate, the light, sweet crude oil produced in the United States, soared above $119.48 per barrel but fell back closer to $103.
The war’s toll on civilian targets grew as Bahrain accused Iran of striking a desalination plant vital to drinking water supplies. Bahrain’s national oil company declared force majeure for its shipments after an Iranian attack set its refinery complex ablaze. The legal declaration releases the company of contractual obligations because of extraordinary circumstances.
Oil depots in Tehran smoldered following overnight strikes by Israel.
Oil prices have surged as the war, now in its second week, ensnares countries and places that are critical to the production and movement of oil and gas from the Persian Gulf.
Prices moderated after the Financial Times reported that some members of the Group of Seven industrial nations were considering releases of strategic oil reserves to alleviate pressure on the markets.
French President Emmanuel Macron said Monday that “the use of strategic reserves is an envisaged option.” He said G7 leaders could meet this week to coordinate a response to climbing energy prices. France currently holds the rotating presidency of the G7 group. Separately, finance ministers from the G7 nations are meeting Monday by video conference to discuss the repercussions from the war.
On Saturday, President Donald Trump downplayed the idea of turning to America’s Strategic Petroleum Reserve, saying U.S. supplies were ample and prices would soon fall.
Roughly 15 million barrels of crude oil — about 20% of the world’s oil — typically are shipped every day through the Strait of Hormuz, according to independent research firm Rystad Energy. The threat of Iranian missile and drone attacks has all but stopped tankers carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran from traveling through the strait, which is bordered in the north by Iran.
Iraq, Kuwait and the UAE have cut oil production as storage tanks fill due to the reduced ability to export crude. Iran, Israel and the United States also have attacked oil and gas facilities since the war started, worsening supply concerns.
The surge in costs for oil and natural gas is pushing fuel prices higher, cascading through other industries and jolting Asian economies that are especially vulnerable due to the region’s heavy reliance on imports from the Middle East.
Iran exports roughly 1.6 million barrels of oil a day, mostly to China, which has called for an immediate end to the fighting. Beijing may need to look elsewhere for supply if Iran’s exports are disrupted, another factor that could increase energy prices.
“All parties have their responsibility to ensure stable and smooth energy supplies,” Chinese Foreign Ministry spokesman Guo Jiakun said in a briefing Monday. “China will take necessary measures to safeguard its own energy security.”
South Korean President Lee Jae Myung warned Monday of strict penalties for refiners and gas stations caught hoarding or colluding on prices, saying it would be wise to find alternatives to supplies that must travel through the Strait of Hormuz.
Across Southeast Asia, the spike in prices has led to long lines outside filling stations.
“Higher oil and gas prices will affect everyone and our economy,” said Le Van Tu, who was waiting outside a gas station in the Vietnamese capital Hanoi. “All activities, including those using petrol based transportation will be affected.”
South Korea’s Kospi tumbled 6% to 5,251.87.
The last time Brent and U.S. crude futures traded near the current level was in 2022, after Russia invaded Ukraine.
Higher energy costs push inflation higher, straining household budgets and denting the consumer spending that is a main driver of many big economies. Those worries have spilled into financial markets, pulling share prices sharply lower.
In the U.S., the average price of a gallon of regular gasoline rose to $3.48 as of early Monday, up nearly 50 cents from a week earlier, according to AAA motor club. Diesel, used heavily in shipping, sold for about $4.66 a gallon, a weekly increase of more than 80 cents.
The price of natural gas in the U.S. also has climbed during the war, though not by as much as oil. It was selling for about $3.34 per 1,000 cubic feet early Monday. That’s up from Friday’s closing price of $3.19.
This story has been corrected to show that the Israel-U.S. attacks on Iran started Feb. 28, not March 1.
Kurtenbach reported from Bangkok. Associated Press journalist John Leicester contributed from Paris.
—Alex Veiga and Elaine Kurtenbach, AP business writers