Crude oil prices pulled back on Monday from recent five-month highs, settling just above $75 per barrel. Despite the decline, prices remain 12% higher than a month ago, largely due to mounting investor concerns over potential supply disruptions triggered by escalating tensions between Iran and Israel.
Early in Monday’s trading session, West Texas Intermediate (WTI) crude climbed by about 3%, briefly retesting the $75 mark. The rally followed reports that Israel had launched airstrikes on two Iranian gas processing plants over the weekend — raising fears of further escalation in the region.
Geopolitical Risks Continue to Drive Oil Markets
Since Israel’s attack on Tehran last Friday, oil markets have been on edge. The Middle East, already a hotspot of geopolitical risk, has grown even more volatile. Analysts warn that if the conflict spreads further, disruptions to oil production and transport could become severe.
One of the biggest concerns is that Iran may attempt to block the Strait of Hormuz, a critical passage through which roughly 20% of the world’s oil supply flows. Such a move would send shockwaves through global energy markets and could push crude prices significantly higher.
Chinese Economic Data Offers Mixed Signals
On the macroeconomic front, oil prices found little support from China, the world’s second-largest economy and a major oil consumer.
Retail sales rose 6.4% year-on-year in May, beating expectations and indicating strong consumer demand.
However, industrial production rose only 5.8%, slightly below market forecasts, suggesting that China’s manufacturing sector may still be struggling to gain momentum.
The data reflects uneven recovery trends in China and has failed to bolster confidence in sustained energy demand growth.
US-China Trade Tensions Add to Demand Concerns
Further pressuring oil market sentiment is renewed uncertainty around US-China trade relations. Over the weekend, reports suggested that the current trade agreement between the two nations may not resolve ongoing disputes over rare earth exports.
This development has sparked fresh concerns about global trade disruptions, which could undermine economic activity and lower projected oil demand worldwide.
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