Global oil prices climbed on Monday, and the U.S. dollar strengthened in the wake of airstrikes on Iran’s nuclear facilities over the weekend. The geopolitical tensions triggered market reactions as investors gauged potential fallout from the attack and anticipated Tehran’s next move.

Both Brent crude and West Texas Intermediate (WTI) surged by more than four per cent when markets opened, reaching their highest levels since January. However, the early gains moderated by mid-afternoon in Asia, with both benchmarks settling at about 1.1 per cent higher.

Analysts pointed to investor concerns over a possible disruption in global oil supply, particularly through the Strait of Hormuz—a narrow and strategic passageway through which nearly 20 per cent of the world’s oil output is transported. Iran, which produces about 3.3 million barrels of oil daily and exports nearly half, could seek to block the strait in retaliation, potentially sending oil prices soaring.

“So far, satellite imagery suggests oil continues to flow through the Strait, which may explain the market’s measured response,” noted Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. “Many investors remain hopeful that Iran will avoid escalating the conflict further, in part to protect its own oil infrastructure and preserve trade with major partners like China.”

Still, Ozkardeskaya warned that if tensions escalate, oil prices could spike above $100 per barrel—a development that could significantly impact energy-dependent economies, particularly in Asia. WTI crude was trading at approximately $75 per barrel on Monday.

Economists at MUFG echoed these concerns, saying an oil price shock would have a “real negative impact” on most Asian economies, which are largely net energy importers.

The political tensions also reverberated in global financial markets. Asian stock markets mostly dipped, with Tokyo falling 0.1 per cent, Seoul down 0.2 per cent, Sydney losing 0.4 per cent, and Jakarta plunging 1.7 per cent. However, Hong Kong gained 0.6 per cent, while Shanghai closed up 0.7 per cent. European indices opened weaker, with early losses in London, Frankfurt, and Paris.

Meanwhile, the U.S. dollar appreciated against major global currencies as investors sought safety in the greenback. However, some analysts remain sceptical about the dollar’s strength lasting in the face of broader economic uncertainty.

“If the move proves to be just a knee-jerk reaction to short-lived U.S. involvement in the Middle East, the dollar could resume its earlier downward trajectory,” said Sebastian Boyd, a strategist at Bloomberg.

Chris Weston of Pepperstone added that Iran may not need to fully block the Strait of Hormuz to cause economic ripples. “Just creating enough belief that they could disrupt this vital route might increase maritime insurance and shipping costs to the point where global crude and gas supplies are severely affected,” he said.

Adding to the market jitters, Weston noted that upcoming headlines on trade negotiations and the U.S. presidential election—particularly former President Donald Trump’s stance on Middle East policy—could further fuel volatility.

While markets await Iran’s response and global leaders push for de-escalation, the U.S. strikes have introduced new uncertainty into oil markets and revived fears of broader conflict in an already fragile region.