Oil prices have risen to levels not seen in years as the war in Iran intensifies

Oil prices rose near $120 a barrel before retreating Monday as the Iran war intensified, threatening production and shipping in the Middle East and hitting financial markets.

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The price of a barrel of Brent crude, the international standard, rose to $119.50 a barrel early in the day but later traded near $106 a barrel, up 14%, before the opening bell.

WTI, the light, sweet crude oil produced in the United States, rose to above $119.48 a barrel, but fell again to nearly $103.

The war’s toll on civilian targets increased as Bahrain accused Iran of striking a desalination plant vital to drinking water supplies. The Bahrain National Oil Company declared force majeure for its shipments after an Iranian attack caused its refinery complex to catch fire. The legal declaration exempts the company from contractual obligations due to exceptional circumstances.

Oil warehouses in Tehran caught fire after raids launched by Israel during the night.

Oil prices have risen as the war, now in its second week, has trapped countries and places considered 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 industrialized nations were considering releasing strategic oil reserves to ease pressure on markets.

French President Emmanuel Macron said on Monday that “the use of strategic reserves is a feasible option.” He said that G7 leaders may meet this week to coordinate a response to rising energy prices. France currently holds the rotating presidency of the G7. Separately, G7 finance ministers are meeting on Monday via video conference to discuss the fallout from the war.

On Saturday, President Donald Trump downplayed the idea of ​​resorting to the US Strategic Petroleum Reserve, saying that US supplies are abundant and that prices will fall soon.

Nearly 15 million barrels of crude oil — about 20% of the world’s oil — are shipped daily through the Strait of Hormuz, according to independent research firm Rystad Energy. The threat of Iranian missile and drone attacks has prevented oil and gas tankers from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran from traveling through the strait, which Iran borders to the north.

Iraq, Kuwait and the United Arab Emirates reduced oil production as storage tanks filled up due to reduced capacity to export crude. Iran, Israel and the United States have also attacked oil and gas facilities since the war began, exacerbating concerns about supplies.

The surge in oil and natural gas costs is pushing fuel prices higher, rippling across other industries and shaking Asian economies that are particularly vulnerable because of the region’s heavy reliance on imports from the Middle East.

Iran exports nearly 1.6 million barrels of oil per day, most of it to China, which has called for an immediate end to the fighting. Beijing may need to look for supplies elsewhere if Iranian exports are disrupted, another factor that could lead to higher energy prices.

“All parties bear their responsibility to ensure stable and smooth energy supply,” Chinese Foreign Ministry spokesman Guo Jiaqun said at a press conference on Monday. He added, “China will take the necessary measures to protect its energy security.”

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South Korean President Lee Jae-myung warned Monday of tough sanctions on refineries and gas stations caught stockpiling or colluding on prices, saying it would be wise to find alternatives for supplies that must pass through the Strait of Hormuz.

Across Southeast Asia, spikes in prices have led to long queues outside gas stations.

“Rising 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 will be affected, including those using gasoline-based transportation.”

South Korea’s Kospi index fell by 6% to 5,251.87 points.

The last time Brent and US crude futures traded near the current level was in 2022, after Russia’s invasion of Ukraine.

High energy costs are pushing inflation higher, putting pressure on household budgets and affecting consumer spending, which is the main driver of many major economies. These fears spread to financial markets, causing stock prices to fall sharply.

In the United States, the average price of a gallon of regular gasoline rose to $3.48 as of early Monday, up about 50 cents from the previous week, according to AAA Auto Club. Diesel, used heavily in shipping, sold for about $4.66 a gallon, a weekly increase of more than 80 cents.

Natural gas prices in the United States also rose during the war, but not as much as oil prices. It was selling for about $3.34 per 1,000 cubic feet early Monday. This is higher than Friday’s closing price of $3.19.

Kurtenbach reported from Bangkok. Associated Press journalist John Lester contributed from Paris.