Oil prices soar past $100 a barrel as war escalates in Iran

By Auzinea Bacon, David Goldman, CNN

(CNN) — The price of oil kept climbing Monday, having surged past $100 per barrel Sunday, the first time it crossed that mark since Russia’s 2022 invasion of Ukraine.

Brent crude, the global oil benchmark, neared $120 a barrel in early trade before paring some of those gains to trade at around $104, a 12% gain on the day. WTI, the US benchmark, soared more than 11% Monday to $101. US crude briefly hit $110 a barrel Sunday evening.

President Donald Trump, in a social media post, called surging oil costs a “very small price to pay.”

“Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!” Trump posted Sunday on Truth Social.

But investors are growing increasingly worried about a protracted war that delivers a sustained hit to energy supply and prices, particularly following Iran’s decision to appoint Mojtaba Khamenei as its next supreme leader. Khamenei is the the son of former leader, Ali Khamenei, who was killed in the first wave of US and Israeli strikes.

“It’s a sign of continuation of Iran’s hardline approach and indicates that the war will be more prolonged than financial markets had assumed last week,” Neil Wilson, a strategist at UK trading platform Saxo Markets, said in a note. “Complacency has been replaced by a degree of panic because the market is now pricing in a more sustained hit to energy and trade flows,” he added.

Oil futures and gasoline prices have skyrocketed as traders worry that the war in Iran would lead to prolonged restrictions on the flow of oil around the globe — particularly as the war has spread to other countries in the Middle East, including attacks on nearby refineries in the oil-rich region.

Iran has threatened to attack any oil tanker passing through the Strait of Hormuz, through which 20% of the world’s oil transits.

Oil could rise to $150 a barrel by the end of March if travel through the strait doesn’t start flowing again, said Homayoun Falakshahi, lead crude research analyst at Kpler.

Surging oil prices have weighed heavily on stocks in recent days, as traders fear that a prolonged spike in fuel prices could lead to another spike in inflation and hurt the economy. Dow futures dropped more than 800 points, or 1.7%. S&P 500 and Nasdaq futures fell 1.6%.

Triggered by the shock of the initial February 28 strikes in Iran, the average price of gasoline in America reached $3.45 a gallon Sunday, up 16% from the week prior, according to AAA.

A prolonged spike in oil and gas prices could exacerbate America’s struggles with affordability, putting Trump and Republicans in a precarious political position ahead of this year’s midterm elections.

Attempts to keep prices in check

The Trump administration on Sunday tried to assuage fears that the US and Israeli-led military campaign against Iran would have long-term effects at the pump.

The administration announced a plan to supply insurance to oil tankers passing through the strait, after maritime insurers said they would not cover ships in the region if they were attacked. The White House also said it would work to secure naval escorts for ships, but a plan hasn’t emerged, and shipping companies have said they are hesitant to traverse the region while the conflict continues.

“Our shipping experts say the administration’s plan could help but won’t be enough on its own,” Falakshahi said. “I think the market will only calm down if there is a significant de-escalation now.”

A senior Iranian official warned Sunday that the conflict has entered a “new phase” following Israel’s strikes against Iranian oil storage sites. The official signaled Iran may retaliate on the region’s energy infrastructure in the coming days.

“Iran will not give up control of the Strait of Hormuz until it achieves its desired results,” the official said.

It has left oil producers with no more room to store the oil they’re pumping. That means many oil producers are reducing their output.

On CNN’s “State of the Union,” Energy Secretary Chris Wright said the US does not plan to strike Iran’s oil industry or other energy infrastructure sites. But Iranian oil is heavily sanctioned, and China is its only major buyer.

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CNN’s Kate Trafecante, Fred Pleitgen, Kit Maher, Maureen Chowdhury and Hanna Ziady contributed to this report.