Oil surges past $94 after U.S. strikes Iran and Israel deepens Lebanon incursion

Oil prices climbed sharply in early Asian trading on Monday as a significant escalation of military activity across the Middle East intensified fears of a prolonged disruption to global energy supplies, overshadowing weak economic indicators from China.

West Texas Intermediate crude futures rose 3.27% to trade at $90.22 per barrel, while Brent crude, the global benchmark, advanced 3.36% to reach $94.18 per barrel.

The sudden upward move effectively reversed last week's steep losses, which had been triggered by speculative reports that Washington and Tehran were close to an agreement to extend a temporary ceasefire and reopen the vital Strait of Hormuz shipping corridor.

Market anxiety intensified over the weekend following direct military engagements involving both U.S. and Israeli forces.

U.S. Central Command confirmed it conducted precision airstrikes inside Iran, targeting radar installations and command-and-control facilities utilized for drone operations.

The Pentagon described the actions as self-defense measures executed after Iranian forces shot down a U.S. MQ-1 surveillance drone that CentCom maintained was operating over international waters.

Simultaneously, the theater of conflict deepened in the Levant.

Israeli ground forces crossed the Litani River and captured Beaufort Castle, a strategically vital hilltop fortress in southern Lebanon.

The advance followed a declaration by the Israel Defense Forces marking all territories south of the Zahrani River as an active combat zone.

Prime Minister Benjamin Netanyahu subsequently instructed the military to expand and deepen its operations against Hezbollah, further complicating the geopolitical landscape.

The military synchronization shatters optimism surrounding U.S.-mediated diplomatic efforts.

High-level talks between Israeli and Lebanese delegations held in Washington on Friday had initially been characterized by U.S. officials as productive, but those negotiations now appear to hang in the balance.

Iranian officials have previously asserted that resolving the status of Lebanon remains a core requirement for any broader, long-term peace framework with the U.S.

The latest escalation adds severe upside risk to an energy market already strained by the ongoing closure of the Strait of Hormuz by Iran, which continues to strangle maritime crude flows.

Traders are also weighing shifting political signals from Washington.

President Donald Trump stated on Friday that his administration would soon deliver a final determination regarding whether to extend the current ceasefire framework with Iran, though he declined to outline a specific timeline for the announcement.

The lack of a formal signed agreement, combined with the weekend's kinetic actions, has prompted algorithmic and institutional buyers to price a higher risk premium back into energy contracts.