Oil prices spiked near $120 per barrel before falling back slightly on Monday as the Iran war intensified, threatening production and shipping in the Middle East and pummelling financial markets.

The price for a barrel of Brent crude, the international standard, surged to $119.50 per barrel but later was trading at $112.98.

West Texas Intermediate, the light, sweet crude oil produced in the United States, spiked at $119.48 per barrel but fell back to $110.17.

The war’s toll on civilian targets grew as Bahrain accused Iran of striking a desalination plant vital to drinking water supplies, and oil depots in Tehran smoldered following overnight Israeli strikes.

Oil prices have surged as the war, now in its second week, ensnares countries and places that are critical to the production and movement of oil and gas from the Persian Gulf.

Roughly 15 million barrels of crude oil — about 20% of the world’s oil — typically are shipped every day through the Strait of Hormuz, according to independent research firm Rystad Energy.

The threat of Iranian missile and drone attacks has all but stopped tankers from travelling through the strait, which is bordered in the north by Iran, carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran.

Iraq, Kuwait and the UAE have cut their oil production as storage tanks fill due to the reduced ability to export crude. Iran, Israel and the United States also have attacked oil and gas facilities since the war started, exacerbating supply concerns.

The surge in costs for oil and natural gas is pushing fuel prices higher, cascading through other industries and jolting Asian economies that are especially vulnerable due to the region’s heavy reliance on imports from the Middle East.

The last time Brent and US crude futures traded near the current level was in 2022, after Russia invaded Ukraine.

Higher energy costs push inflation higher, straining household budgets and denting the consumer spending that is a main driver of many big economies.

Tokyo’s benchmark Nikkei 225 index plunged more than 7% early Monday, while other markets also foundered.

In the US, a gallon of regular gasoline rose to $3.45 on Sunday, about 47 cents more than a week earlier, according to AAA motor club. Diesel was selling for about $4.60 a gallon, a weekly increase of about 83 cents.

 India advocates de-escalation and return to dialogue and diplomacy, External Affairs Minister S Jaishankar said on Monday on the widening West Asia conflict, while stressing on respect for sovereignty and territorial integrity of all states in the region.

Making a suo moto statement on the crisis that broke out on February 28 when the US and Israel launched military strikes on Iran and Tehran retaliated with attacks of US positions in the region as well as Israel, Subrahmanyam Jaishankar said safety of Indian nationals as well as national interests such as energy security and trade remain top most priority for the government.

“India is in favour of peace and urges a return to dialogue and diplomacy. We advocate de-escalation, restraint, and ensuring the safety of civilians,” he said. “The wellbeing and security of the Indian community in the region is our priority. And our national interests, including energy security and trade, will always remain paramount.” India, Jaishankar said, expressed deep concern at the outset and urged all sides to exercise restraint, avoid escalation and prioritise civilian safety, stressing that dialogue and diplomacy remain the only viable path to resolve the crisis while respecting the sovereignty and territorial integrity of all states in the region.

Amid opposition MPs staging a walkout of the House after they vociferously put across their demand for a discussion on the issue, the minister said the government is closely monitoring the escalating conflict and has taken multiple steps to ensure the safety of Indian nationals in the region and safeguard the country’s strategic interests, he said.

The latest round of hostilities that began on February 28 has seen fighting between Israel and the United States on one side and Iran on the other, along with attacks on several Gulf countries and significant casualties, including among Iran’s leadership.

Jaishankar said the Cabinet Committee on Security met on March 1 under the chairmanship of Prime Minister Narendra Modi and reviewed the situation, including implications for regional security, economic activity and the safety of the large Indian community in the Gulf.

He noted that nearly one crore Indians live and work in Gulf countries, while few thousand are in Iran for study or employment, making regional stability critical for India. The Gulf is also central to India’s energy security and trade, accounting for nearly USD 200 billion in commerce, he said

The minister said attacks on merchant shipping have affected Indian seafarers, with casualties reported and one Indian mariner still missing.

Jaishankar said the government had issued a series of travel advisories since January, urging Indian nationals to avoid non-essential travel to Iran and advising those already there to remain in contact with the Indian embassy and follow safety precautions.

He said Indian diplomatic missions have assisted citizens with relocation and evacuation efforts, including helping some Indian nationals travel to neighbouring countries such as Armenia for onward return to India.

According to the minister, nearly 67,000 Indian nationals have returned from the region so far as the government facilitated additional commercial flights and other travel arrangements amid partial airspace openings.

The Ministry of External Affairs has also set up a dedicated control room to monitor the situation and respond to requests from Indian nationals, while the Directorate General of Shipping has created a quick response team to assist Indian seafarers.

Jaishankar said the Indian government has remained in close contact with regional leaders, with Prime Minister Modi speaking to the leaders of the UAE, Qatar, Saudi Arabia, Kuwait, Bahrain, Oman, Jordan, and Israel, all of whom assured the safety of the Indian community.

He added that India has also maintained diplomatic contact with the US and Iran, and he himself spoke with Iranian Foreign Minister Abbas Araghchi on February 28 and March 5.

“While attempts have been made, contacts with Iran at the leadership level are obviously difficult at this time. I have, however, spoken to (Iranian) Foreign Minister Araqi on 28th February and 5 March 2026. We will continue these high-level conversations in the coming days,” he said.

The minister also informed the House that an Iranian vessel, IRIS Lavan, was docked at Kochi on March 4 after India granted permission for humanitarian reasons.

Jaishankar said the government remains committed to protecting India’s energy security and economic interests amid the volatile situation. (Agencies)