Oil prices surged dramatically on Monday, with Brent crude jumping as much as 13% at the market open, following a series of attacks on energy infrastructure and shipping routes in the Middle East. The escalation triggered a sharp rally in energy stocks, with Chevron (CVX) shares rising roughly 4% and Occidental Petroleum (OXY) jumping about 7% in premarket trading.
The price spike was driven by immediate supply concerns after a drone strike forced Saudi Aramco to halt operations at its Ras Tanura refinery, a facility capable of processing approximately 550,000 barrels per day. Simultaneously, shipping activity near the critical Strait of Hormuz slowed significantly. This maritime chokepoint is responsible for transporting roughly 20% of the global oil supply, making any disruption a major market catalyst.
Chevron faced a direct operational impact when Israel's Energy Ministry ordered a halt to parts of the country's gas production. The offshore Leviathan gas field, operated by Chevron, was taken offline due to security concerns following regional attacks.
Major investment banks quickly revised their oil price forecasts in response. Citigroup lifted its short-term Brent crude forecast to $85 per barrel and warned that prices could reach $120 in extreme supply disruption scenarios. Analysts highlighted that the key risk is the potential for prolonged disruption to transit through the Strait of Hormuz. HSBC noted that around 4.6 million barrels per day of spare OPEC+ capacity would be difficult to export if the strait were to close.
While OPEC+ recently approved a production increase of 206,000 barrels per day starting in April, market participants viewed this supply addition as small relative to the current geopolitical risks. JPMorgan analysis estimated that Gulf producers hold about 343 million barrels of onshore storage capacity, which, combined with offshore storage, could support around 25 days of stranded production before output cuts would be necessary.
The rally extended across the energy sector, with Exxon Mobil, ConocoPhillips, and Occidental Petroleum all posting strong premarket gains. Occidental's rise was further supported by its strengthened financial position, having reduced debt by nearly $14 billion over the past 20 months and generated roughly $4.3 billion in free cash flow over the past year.
Investors are now closely monitoring whether shipping activity through the Strait of Hormuz returns to normal and if Israeli gas production resumes. The market is also awaiting weekly U.S. petroleum inventory data from the Energy Information Administration, due for release Wednesday at 10:30 a.m. ET.
