Over the weekend, a series of significant geopolitical and domestic developments fueled volatility in the oil markets. However, as of Monday morning, prices have retreated from the overnight high of $77.49 per barrel. WTI crude’s inability to sustain higher prices stems from several contributing factors.

One of the most impactful events was Israel’s strike on the South Pars natural gas field—the world’s largest, and the primary source of Iran’s gas production. A fire broke out at one of the units, halting approximately 12 million cubic meters of daily gas production. This marked one of the most consequential attacks on energy infrastructure to date. What makes this strike particularly noteworthy is that the field is jointly shared with Qatar, raising concerns that other regional powers with economic interests might be drawn into the conflict.

Israel also targeted the Shahran fuel and gas depot in central Tehran, as well as a major oil refinery in Shahr-e Rey. These facilities are primarily used for domestic consumption rather than international trade. As a result, while global energy traders remain cautiously optimistic that broader market disruptions will be limited, they are beginning to price in some risk.

Tanker rates from the Middle East Gulf to Japan rose 20% on Friday due to the potential need for longer, safer routes and the likelihood of rising insurance premiums. The Strait of Hormuz—a vital chokepoint connecting the Persian Gulf to the Gulf of Oman—continues to operate normally, with tankers transiting through with minimal disruptions. Still, fears persist that Iran could restrict traffic or establish maritime “checkpoints,” which would significantly disrupt energy flows and lift prices.

Given that global energy infrastructure has yet to be materially impacted, traders have been quick to sell into oil price rallies.

Another key event, somewhat overshadowed by Middle East tensions, occurred domestically: a fire broke out on Saturday at Marathon Petroleum’s Galveston Bay Refinery in Texas. This is the largest refinery in the United States, with the capacity to process 631,000 barrels per day. Although the fire has now been mostly extinguished, its immediate effect is bearish for WTI crude prices. When refining operations are disrupted, crude oil supplies can build up, while refined products such as gasoline and diesel may face shortages. This supply dynamic is one reason why diesel and gasoline prices have been outperforming crude in overnight trading.

While oil prices remain sensitive to geopolitical tensions and domestic supply shocks, the market’s reserved reaction suggests traders are still betting on limited disruption to global flows—for now. However, the potential for escalation in the Middle East and infrastructure setbacks at home underscores the fragile balance currently supporting oil market stability. As such, price volatility is likely to persist in the near term, with energy traders closely monitoring developments around the Strait of Hormuz and U.S. refining capacity for any signs of lasting impact.

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