What triggered the sudden price spike
Crude oil prices surged above $110 a barrel in Sunday trading as markets reacted to the closure of the Strait of Hormuz and fresh output curbs by Gulf producers.
U.S. benchmark West Texas Intermediate (WTI) was reported near $109.27 after a jump of about 20%, while Brent was reported around $110.70 after rising more than 18%. U.S. crude was also described as up roughly 35% over the past week, one of the biggest weekly moves since oil futures trading began in 1983.
Prices moved fast because traders were forced to price in two risks at once: fewer barrels reaching buyers, and no clear timeline for when shipping will fully resume. When supply is tight, even short delays can lift spot prices and widen price swings.
Why the Strait of Hormuz is a global chokepoint
The Strait of Hormuz is a narrow passage linking the Persian Gulf with the Gulf of Oman and the wider Arabian Sea. Large volumes of crude oil and refined products pass through it on their way to major markets in Asia and beyond.
Many industry estimates put the share at roughly one-fifth of global oil supply moving through this route in normal conditions. That is why disruption can tighten supply quickly, raise freight rates, and push up insurance costs for ships.
A shutdown also changes behaviour. Some tanker operators avoid the route, charter rates rise, and buyers rush to secure alternative barrels. That “risk premium” can become part of the daily price, even before physical shortages fully show up.
How Gulf producers and shippers are reacting
Several Gulf producers signalled they are managing output because the closure is creating storage and transport bottlenecks. Kuwait, OPEC’s fifth-largest producer, said it implemented precautionary cuts to crude production and refinery output, citing threats to safe passage through Hormuz. The size of the reductions was not disclosed.
Disruption appeared more severe in Iraq. Industry officials said output from the country’s three main southern oilfields dropped to about 1.3 million barrels per day from roughly 4.3 million before the conflict, a steep decline that would reduce export availability if it continues.
The UAE said it is carefully managing offshore production due to storage constraints, while onshore operations remain unaffected. Across the region, traders are watching whether producers can reroute shipments or temporarily slow production to avoid overflowing storage.
On the shipping side, risk is the core issue. If companies believe commercial vessels could be targeted, traffic can fall sharply. Fewer ships and slower movement mean delayed deliveries, which can keep prices elevated in the short term.
What happens next and why it matters for Pakistan
Geopolitics is amplifying volatility. U.S. President Donald Trump said the war was “already won,” while Iranian state-linked reports indicated that Mojtaba Khamenei had been named Iran’s new supreme leader. Markets watch such signals for clues about escalation or a path to negotiations.
U.S. Energy Secretary Chris Wright said shipping could begin normalising once Iran’s ability to threaten vessels is neutralised, while noting that traffic is still far from normal and may take time to recover.
For Pakistan, higher global oil prices usually mean a larger import bill, pressure on the rupee, and higher local fuel and transport costs. Over time, that can add to inflation and complicate interest-rate decisions.
Next, markets will track three practical signals: whether ship traffic restarts through Hormuz, whether Iraqi and Gulf output moves back toward earlier levels, and whether major buyers draw down inventories to bridge the gap. If the shutdown lasts, prices can stay high; if exports normalise, the spike could cool, but volatility may remain while the conflict continues.
