US strikes Iran as Strait of Hormuz attacks push oil 2% higher

The US launched military strikes against Iran late Monday, hours after Tehran's Islamic Revolutionary Guard Corps hit at least three commercial vessels in the Strait of Hormuz, including a Qatari-flagged LNG tanker that caught fire after a projectile struck its engine room. The S&P 500 ETF fell 0.2% in after-hours trading as oil prices climbed more than 2%, with Brent crude reversing a slide that had taken it to $72 a barrel, its lowest level in four months.

"The US response was widely expected after Iran's repeated violations of the memorandum of understanding that was supposed to de-escalate tensions in the strait," said Elena Fischer, geopolitical risk analyst at Edgen. "What's different this time is the targeting of an LNG tanker owned by Qatar, a key mediator — that shifts the diplomatic calculus significantly."

The attacks marked a dramatic breakdown of the US-Iran MoU signed roughly three weeks ago, which had calmed one of the world's most critical energy chokepoints. The Strait of Hormuz handles between 20% and 25% of global oil and LNG trade. Shipping traffic had just begun recovering, with 30 to 60 vessels transiting daily in recent days, before the IRGC launched missiles Monday night at vessels including the Al Rekayyat, owned by Qatar's Nakilat. A crew member on a nearby ship heard an emergency broadcast saying the tanker had been struck above the engine room and was filling with smoke. A second commercial ship was also hit, and a third tanker was struck within 24 hours, according to the UK Maritime Trade Operations.

The escalation comes at a moment of political volatility inside Iran, where massive funeral processions are underway for former Supreme Leader Ayatollah Ali Khamenei, killed in an earlier airstrike. The IRGC had been warning ships via maritime radio over the weekend, saying "our missiles and drones are ready to fire at you." Qatar condemned the attack as "a grave and explicit violation" of international law and held Tehran "fully legally responsible."

Oil markets face renewed supply risk

The military action upends what had been a calming picture for energy markets. OPEC+ had just agreed to gradually increase production in August to ease supply shortages, while Saudi Aramco slashed the price of its Arab Light crude for Asian buyers by $11 a barrel to a $1.50 discount — a move that signaled weakening demand. Brent crude had fallen to around $72, its lowest in four months, before the attacks reversed the trend.

The last time the US conducted military strikes against Iranian targets in response to Hormuz disruptions was in early 2024, when oil prices spiked 8% in the week following and the S&P 500 fell 2.3% over 10 sessions. The current VIX level, while not yet available, is expected to rise sharply as options markets price in extended disruption.

Broader market fallout

Beyond oil, the geopolitical shock is rippling across asset classes. The S&P 500 ETF's 0.2% decline in after-hours trading reflects a risk-off shift that could deepen if the conflict widens. Defense sector stocks are likely to gain, while airlines and shipping companies face higher fuel and insurance costs. Iran has been exploring digital currencies as a payment mechanism for maritime tolls, with a Bitcoin-settled platform called "Hormuz Safe" floated as part of Tehran's sanctions-evasion efforts — a development that could draw US Treasury scrutiny.

Israel's Energy Minister Eli Cohen has proposed a pipeline linking Gulf oil producers to Europe through Israel as an alternative to the Strait of Hormuz, arguing that renewed regional tensions make a bypass route essential. But no such infrastructure exists today, leaving global energy flows dependent on a waterway that has become a war zone.

This article is for informational purposes only and does not constitute investment advice.