Oil prices edged higher and the US dollar gained ground on Monday following Washington’s weekend strike on Iranian nuclear facilities, adding fresh volatility to global markets amid fears of further escalation in the Middle East.

Brent crude and U.S. benchmark West Texas Intermediate (WTI) both surged more than 4% at the start of Asian trading, hitting their highest levels since January, before settling to a 1.1% gain by mid-afternoon. Brent was trading at $78.08 per barrel, while WTI stood at $74.89.

The price jump reflects renewed anxiety over potential disruptions in oil supply, particularly if Iran retaliates by targeting the Strait of Hormuz — a vital shipping route that handles roughly 20% of global oil output.

“Iran may not need to shut down the Strait outright,” noted Chris Weston of Pepperstone. “By creating uncertainty, they could drive up maritime transport costs, which alone could significantly impact crude and gas supply chains.”

Despite fears, satellite data indicates oil flows through the Strait have so far continued, contributing to the limited market reaction. “Many remain optimistic that Iran will avoid full-blown retaliation,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “A broader conflict would also endanger Iran’s own oil infrastructure and risk alienating China, its largest oil customer.”

Still, analysts warn that if tensions escalate, U.S. crude prices could exceed $100 per barrel, dealing a blow to oil-importing Asian economies. Economists at MUFG cautioned that “an oil price shock would create a real negative impact” on energy-reliant countries in the region.

Markets mostly down, dollar strengthens

Asian equities were mixed, reflecting market unease. Tokyo’s Nikkei slipped 0.1%, Seoul shed 0.2%, Sydney lost 0.4%, and Jakarta dropped 1.7%. Conversely, Hong Kong and Shanghai posted gains of 0.6% and 0.7% respectively. European markets opened lower, with London’s FTSE 100 down 0.3%.

The U.S. dollar climbed amid risk aversion, strengthening against the euro and yen. The dollar rose to 147.14 yen from 146.13, while the euro dipped to $1.1512. The pound edged up slightly to $1.3445.

However, Bloomberg strategist Sebastian Boyd warned the dollar’s rise could be temporary: “If this is a knee-jerk reaction to what markets see as short-term U.S. involvement, the dollar may resume its downward trend.”

Looking ahead, geopolitical developments, possible Iranian retaliation, and ongoing trade negotiations are expected to dominate market sentiment. As Weston noted, “Trump’s attention may be on the Middle East now, but headlines on trade talks could soon add to investor anxiety.”