Brent Crude Surges 25% To $116.5 As West Asia Conflict Rattles Global Markets

Brent crude prices surged sharply on Monday, rising by more than 25 per cent to $116.5 per barrel amid the ongoing conflict in West Asia, which has made crude prices bullish.

During the trading session, crude prices also touched a high of $119.45 per barrel, reflecting growing concerns in the global energy market as geopolitical tensions intensify in the region.

West Asia is currently engulfed in a high-intensity, multi-front conflict involving Iran, Israel and the United States.

The crisis escalated following coordinated US-Israeli strikes on Iran, which reportedly resulted in the death of Iran's Supreme Leader, Ayatollah Ali Khamenei.

The developments have significantly raised fears of supply disruptions in global oil markets.

Why Are Crude Oil Prices Rising Amid West Asia Conflict?

Market experts believe the ongoing tensions are pushing crude prices higher and could drive them further up in the near term.

Ajay Bagga, Banking and Market Expert, told ANI that oil prices are already reflecting growing shortage concerns and risk sentiment in global markets.

"A 20 per cent global shortage of oil is now getting reflected in prices, which may go up further to the USD 150 level on Brent," Bagga added.

He added that the current rise in oil prices reflects a strong fear premium in global markets.

"This is the Fear Premium as at these levels there will be demand destruction across the global economy. Oil prices are strongly correlated to food prices, and bring in a cost plus inflation into the entire economy," he said.

Could Rising Crude Oil Prices Trigger A Global Recession?

Bagga further noted that the surge in oil prices could have broader implications for global economic conditions.

"Monetary policy tightening may be forced onto central banks if this inflation stays elevated for a longer time. Overall, these levels of inflation point to an incipient global recession on the back of aggregate demand turning negative as marginal consumers stop discretionary consumption and cut back on non-discretionary consumption," he added.

The sharp rise in crude prices has raised concerns across financial markets, as higher oil prices often lead to rising inflation and economic uncertainty globally.

Experts warn that if geopolitical tensions continue to escalate and supply disruptions persist, oil prices could remain volatile and may move towards the $150 level in the coming period.

The ongoing conflict in West Asia is also raising concerns about broader economic repercussions.

How Could West Asia Conflict Trigger A Fresh Wave Of Global Inflation?

A recent report by SBI Research suggests that the United States could potentially eliminate a massive portion of its budget deficit by changing how it values its gold reserves as the conflict continues.

The report states, "The corresponding revaluation reserves would create a massive jump in assets first, wiping ~70% of US Budget deficit."

While these reserves are currently valued at prices from 1973, updating them to current market rates would provide a significant financial cushion during global instability.

The report further warns that the spreading conflict could have wide-ranging economic consequences.

It explains, "Should the raging conflict in the Middle East proliferate asymmetrically across jurisdictions, asset classes and supply chains, the cumulative shock could trigger a new wave of Inflation globally."

Could The US Benefit From Rising Crude Oil Prices Amid West Asia Conflict?

At the same time, the United States could benefit economically due to its large energy resources.

By using its extensive oil and gas capacity and shifting supply to Europe, American companies may earn enough to cover the costs of the conflict.

The report notes, "With the supply-supply chain triggered squeeze anchoring higher spot and forward prices across Gas and Oil, the US enterprises could reap benefits that more than adequately compensate the spending on war."

The closure of the Strait of Hormuz, a vital route for global energy shipments, is adding to market anxiety.

The report states that nearly "20% of the world's crude oil" passes through the waterway, and disruptions there are pushing energy prices higher and making markets nervous.

The study also points to a broader shift in global financial strategy. Central banks are increasingly moving their reserves away from US government bonds and into gold.

According to the report, "Central banks are shifting away from treasuries to gold holdings. The transition happened in Jun'25 for the first time since 1996."

Rising oil prices have also intensified concerns about sustained inflation and monetary tightening. The report points out, "Increasing oil prices have raised the fear of energy-driven inflation, making markets expect a higher Fed rate for longer."

(With inputs from ANI)