GLOBAL FINANCIAL CENTRES — Energy traders in major financial centers around the world redrew their trading strategies on Monday after U.S.-Israeli drone strikes on Tehran sent oil and gas prices sharply higher. The Strait of Hormuz underwent its first-ever shutdown, disrupting flows of fossil fuels to the global market.

U.S.-Israeli drones began striking targets in Tehran over a weekend. The resulting closure of the strait severed a chokepoint through which one-fifth of the world's oil and gas, a quarter of global seaborne jet fuel, and almost half of global urea used to make fertilizer normally passes. Multiple strikes occurred against key oil and gas infrastructure in the Middle East, damaging facilities underpinning Gulf economies. The current crisis is estimated to have an impact 17 times larger than the halt of Russian energy supplies during the war in Ukraine.

Brent crude recorded its largest one-month price increase on record, with substantial daily price fluctuations. On Thursday, prices for North Sea physical crude cargoes for prompt delivery within 10 to 30 days jumped by $13 per barrel to reach $141 — the highest level since 2008. Futures oil prices had not climbed above $119.50 per barrel. In the United States, fuel prices exceeded $4 per gallon for the first time in four years. The volatility also affected gas, fuel, fertilizer, and equity markets.

Physical-market traders, who arrange deals connecting cargoes of crude and gas to buyers globally, faced logistical challenges. Tankers loaded with millions of barrels of crude in the Atlantic reversed course and were diverted to Asia. Almost a dozen super-chilled liquefied natural gas tankers changed their destination mid-voyage from Europe to Asia. From their Swiss headquarters, the world's largest commodity trading firms — Vitol, Trafigura, Glencore, Gunvor, and Mercuria — attempted to reroute disrupted energy supplies. The conflict between the U.S. and Iran has introduced further uncertainties to shipping and energy markets.

The heightened volatility increased both profit opportunities and the risk of sharp losses. In the third week of the conflict, trades totaling $580 million were placed betting that the oil price would fall, resulting in a large oil futures sell-off. Each major public assurance by the Trump campaign was followed by a decline in oil prices. The U.S. president announced he would postpone airstrikes on Iran's power plants following what he described as productive negotiations with the regime.

Some countries in Asia and Africa implemented emergency rationing plans, while European countries prepared for potential supply shortages in the coming weeks. A group of European energy traders who met for lunch in London's Square Mile during the crisis agreed not to discuss the supply shock. Traders typically exercise discretion to avoid revealing their market positions.