Oil prices have spiked to a 4-year high as escalating conflict between the United States, Israel, and Iran fuels volatility in global energy markets.
According to Trading Economics, Brent crude has surged above US$77 per barrel, while US West Texas Intermediate (WTI) has jumped past US$70. Earlier in the session, prices briefly climbed even higher, marking the strongest levels since mid-2022.
The rally comes as traders rapidly price in the latest geopolitical risk.
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Oil surges as supply fears intensify
Coordinated US and Israeli strikes on Iranian targets have triggered a broader regional escalation. That has included recent Israeli strikes in Beirut and projectile exchanges involving Hezbollah.
Iran has already retaliated, and its Islamic Revolutionary Guard Corps (IRGC) has warned that further and more forceful responses remain possible. That threat of continued escalation is keeping energy markets on edge.
The Strait of Hormuz remains the key flashpoint. The narrow waterway handles roughly 1/5th of global oil shipments, meaning any disruption could have immediate implications for global supply.
Shipping companies are reportedly rerouting vessels, while insurers reassess war risk premiums in the region. Even if physical supply remains intact for now, traders are clearly building in a geopolitical risk premium.
OPEC+ has approved a modest output increase of around 206,000 barrels per day for April. However, that represents less than 0.2% of global demand and is unlikely to offset any material disruption if the conflict intensifies further.
Woodside shares power higher
The oil rally is flowing directly through to Australia's largest energy producers.
The Woodside Energy Group Ltd (ASX: WDS) share price is up 6.15% to $30.05, and is nearly up 30% in 2026.
With a market capitalisation of around $57 billion, Woodside remains one of the ASX's most significant oil and LNG exposures. Sustained higher oil prices typically translate into stronger revenue and operating cash flow, particularly for large-scale producers with global export operations.
Investors appear to be repositioning quickly in anticipation of improved earnings momentum if elevated crude prices persist.
Santos joins the rally
It is a similar case for Santos Ltd (ASX: STO).
The Santos share price has risen 5.62% to $7.14, and is now up around 16% this year.
Santos generates revenue from a diversified portfolio of oil and gas assets across Australia and international markets. Like Woodside, it benefits directly from higher realised oil prices, which can support cash flow and balance sheet flexibility.
The company has a market capitalisation of about $23 billion.
What happens next?
The key question for investors is whether this spike proves temporary or marks the start of a more sustained move higher.
If the conflict escalates further or materially disrupts supply through the Gulf, crude prices could remain elevated. However, any sign of de-escalation may see some of the geopolitical premium unwind quickly.
For now, oil is back in focus, and ASX energy heavyweights are leading the charge in 2026.
