Oil prices soar to four-year high as chaos thrusts global markets into deep uncertainty

Oil prices have jumped to their highest level in four years, as the ongoing conflict between the US, Israel and Iran pitched the Middle East and the global economy into deep uncertainty.

A day after the killing of Supreme Leader Ali Khamenei, the price of Brent Crude surged13 per cent to above $US82 a barrel, while West Texas Intermediate was hovering around $US72. Iranian authorities said they had attacked three oil tankers at the Strait of Hormuz, a key transit point.

Oil from the Persian Gulf must pass through the waterway to get to major markets such as China, India and Japan. Iran pumps about 3.3 million barrels a day, or 3 per cent of global output, but the nation wields greater influence over energy supplies given its strategic location

President Donald Trump, meanwhile, said US forces destroyed and sank nine Iranian naval ships, and that combat operations would continue until all objectives were completed. Traffic on the strait, a choke point off Iran’s coast that handles a fifth of the world’s oil and large volumes of gas, has come to a standstill

US and Israeli strikes – and the Iranian response– sent shockwaves through sectors from shipping to air travel to oil, amid warnings of rising energy costs and disruption to business in the Gulf, a strategic waterway and global trade hub.

US President Donald Trump told Fox News on Sunday that 48 leaders had been killed in the strikes on Iran.

“It’s moving along rapidly. Nobody can believe the success we’re having, 48 leaders are gone in one shot. And it’s moving along rapidly,” he was quoted as saying in an interview with a Fox News reporter

Trump said the attack was intended to ensure Iran could not have a nuclear weapon, to contain its missile program and to eliminate threats to the United States and its allies. The US has hit more than 1000 Iranian targets since the start of the campaign, US Central Command said.

In an interview with the Atlantic magazine on Sunday (Washington time) Trump – who has encouraged the Iranian people to topple their government – said Iran’s leadership wanted to talk to him and he had agreed.

In a separate interview with the Daily Mail, Trump said the military campaign against Iran could continue for the next four weeks.

He has yet to lay out his longer-term aims in Iran, which faces a power vacuum that could leave it in chaos, with unforeseeable consequences for the region.

As the first US casualties were reported, and with the vital Strait of Hormuz closed and the glittering Gulf cities of Dubai, Abu Dhabi and Doha under bombardment, the scale of the risk taken by Trump in launching the attack was becoming clearer.

Only about one in four Americans approve of the operation, according to a Reuters/Ipsos poll on Sunday, and if Hormuz – which is the passage for about 20 per cent of world oil supplies – remains closed for more than a few days, squeezed US consumers will start to feel the pressure on prices at the pumps, months before vital midterm elections.

The Israeli military said late on Sunday (Iran time) that its air force had established aerial superiority over Tehran, and that a wave of strikes across the capital had targeted intelligence, security, and military command centres.

Israel’s present focus is to undermine the Iranian government so that it collapses, an Israeli official said on condition of anonymity, adding that Israel “is acting in its own ways” to get Iranians to take to the streets.

Global air travel was also heavily disrupted as continued air strikes kept major Middle Eastern airports, including Dubai – the world’s busiest international hub – closed in one of the biggest aviation interruptions in recent years.

In Iran, facing its biggest existential challenge since the 1980-88 war with Iraq, President Masoud Pezeshkian said a leadership council composed of himself, the judiciary head and a member of the powerful Guardians Council had temporarily assumed the duties of Supreme Leader.

Oman’s foreign ministry said Iranian Foreign Minister Abbas Araqchi had indicated that Tehran was open to any serious efforts at de-escalation.

But it remained unclear what the longer-term prospects were for Iran to rebuild its leadership and replace the 86-year-old Khamenei, who had held power since the death of the founder of the Islamic Republic, Ayatollah Ruhollah Khomeini in 1989.

Russian President Vladimir Putin denounced Khamenei’s death as a cynical murder and China’s Foreign Minister Wang Yi described it as “blatant killing”.

Israel, which has pressed successive US administrations to take action against Iran, claimed responsibility for killing Khamenei, while he was in his central leadership compound in Tehran, and showed no signs of curbing its attacks.

“We have the capabilities and the targets to keep going on for as long as necessary,” Israeli military spokesperson Lieutenant Colonel Nadav Shoshani said.

“We have the capabilities and the targets to keep going on for as long as necessary,” Israeli military spokesperson Lieutenant Colonel Nadav Shoshani said.

Trump warned that the US would hit Iran “with a force that has never been seen before” if it struck back.

But as Iran fired renewed missile barrages across the region, air raid sirens sounded across Israel late on Sunday, warning of the latest incoming attack, including in Tel Aviv, where projectiles were seen streaking across the night sky.

Israel’s ambulance service said nine people were killed in the town of Beit Shemesh, the United Arab Emirates said Iranian attacks killed three people, and Kuwait reported one dead.

Trump said on social media that the US military had destroyed nine Iranian warships so far and was “going after the rest.”

Meanwhile, the leaders of Britain, France and Germany said they were ready to take steps to defend their interests in the region after the “indiscriminate and disproportionate” missile attacks by Iran.

“We will take steps to defend our interests and those of our allies in the region, potentially fire missiles and drones at their source,” the leaders of the so-called E-3 said in a statement.

“We have agreed to work together with the US and allies in the region on this.”

British Prime Minister Keir Starmer said his country had accepted a US request to use British bases for defensive strikes against Iranian missiles in storage depots or launchers.

“Our partners in the Gulf have asked us to do more to defend them, and it is my duty to protect British lives,” Starmer said posted a video message to X shortly after the joint statement.

“We have British jets in the air as part of co-ordinated defensive operations which have already successfully intercepted Iranian strikes. But the only way to stop the threat is to destroy the missiles at source in their storage depots, or the launchers which are used to fire the missiles. The United States has requested permission to use British bases for that specific and limited defensive purpose.

“We have taken the decision to accept this request to prevent Iran firing missiles across the region, killing innocent civilians, putting British lives at risk and hitting countries that have not been involved.”

Inside Iran, some grieved for Khamenei while others celebrated his death, exposing a deep fault line in a country stunned by the sudden demise of the man who ruled for decades.

Thousands of Iranians were killed in a crackdown authorised by Khamenei against anti-government protests in January, the deadliest wave of unrest since the Islamic Revolution of 1979.

Footage from Tehran showed mourners packed into a square, dressed in black and many of them weeping.

But videos posted on social media also showed joy and defiance elsewhere, with people cheering as a statue was toppled in the city of Dehloran in Ilam province, dancing in the streets of Karaj city, near Tehran in Alborz province, and celebrating in the streets of Izeh in Khuzestan province. Reuters has verified the locations of these videos.

Khamenei, who built Iran into a powerful anti-US force and spread its sway across the Middle East during his 36-year iron-fisted rule, was working in his office at the time of Saturday’s attack, state media said. The raid also killed his daughter, grandchild, daughter-in-law and son-in-law.

Two US sources and a US official familiar with the matter said Israel and the US timed their attack on Saturday to coincide with a meeting Khamenei was holding with top aides.

Experts said that while his death and those of other Iranian leaders would deal Iran a major blow, it would not necessarily spell the end of Iran’s entrenched clerical rule or the sway of the elite Revolutionary Guards over the population.

As supreme leader, Khamenei held ultimate power in Iran, acting as commander-in-chief of the armed forces and deciding on the direction of foreign policy, defined largely by confrontation with the United States and Israel.

His death sparked protests among Shi’ites in neighbouring Pakistan, where police clashed with demonstrators who breached the outer wall of the US consulate in Karachi, leaving nine people dead. In Iraq, police fired tear gas and stun grenades to scatter hundreds of protesters who gathered outside the Green Zone in Baghdad, where the US Embassy is located.

Reuters, Bloomberg

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