The temporary licence was granted as benchmark Brent crude traded around $101 per barrel by 1000 GMT, reflecting continued volatility in energy markets despite Washington’s move. Oil prices have surged nearly 40% since the start of the conflict, driven by fears that escalating hostilities could disrupt global supplies.

Financial markets in Asia also came under pressure as traders weighed the risks of prolonged instability in the Middle East, a region that remains central to global energy production and transportation.

Oil prices jumped about 9% to around $100 a barrel on Thursday as concerns intensified over the durability of supply chains during the ongoing conflict. Traders have been particularly focused on the security of the Strait of Hormuz, the narrow maritime corridor through which roughly one-fifth of the world’s oil supply passes.

Iran has attacked vessels in the strategic waterway during the current confrontation, heightening fears that further disruptions could ripple across global energy markets.

The waiver issued by Washington allows countries to buy Russian petroleum cargoes already at sea, where shipments frequently change ownership during transit. The measure is intended to increase short-term supply availability and reduce upward pressure on prices.

“The temporary increase in oil prices is a short-term and temporary disruption that will result in a massive benefit to our nation and economy in the long term,” said Scott Bessent, the U.S. Treasury secretary.

The energy market turbulence comes as the conflict between Israel and Iran entered its third week with continued missile exchanges.

Iran launched another barrage of missiles and drones toward Israel on Friday, while the Israeli military said it conducted air strikes across Tehran and continued operations against the Iranian-aligned Hezbollah militia in Lebanon, including strikes around the capital, Beirut.

Iranian media reported that rallies marking Quds Day began across Iran in support of Palestinians. Residents in Tehran and the nearby city of Karaj reported hearing explosions and fighter jets during Israeli strikes, according to local media coverage.

Energy traders have closely followed comments by Donald Trump regarding the likely duration of the conflict, which has added to volatility in oil markets and global equities.

The sharp rise in crude prices has contributed to declines in U.S. stocks and broader market unease as investors assess the potential for prolonged disruptions to energy flows.

The waiver allowing limited Russian oil transactions reflects Washington’s attempt to cushion global markets while the conflict continues to unfold across the region.

Crude prices surged as much as 28% to nearly $120 per barrel during trading, the highest level since July 2022, as the week-long war prompted some major Middle Eastern producers to curb supplies while investors assessed the risk of prolonged disruption to shipping through the Strait of Hormuz. Benchmark Brent crude was last trading about 16% higher at roughly $107 per barrel.

The sharp move in energy markets triggered a broad sell-off in sovereign bonds, reflecting expectations that higher oil prices could fuel inflation pressures at a time when policymakers remain focused on price stability.

Investors have been closely monitoring the geopolitical fallout from the conflict in the Middle East, a region responsible for a substantial share of global crude supply. The surge in oil prices has intensified concerns that supply disruptions could become prolonged if the conflict escalates further or maritime routes remain threatened.

The rapid rise in crude prices revived worries that energy-driven inflation could complicate the outlook for monetary policy in major economies.

Higher oil costs can feed into transportation, manufacturing and consumer prices, potentially forcing central banks to reassess interest-rate paths if inflation expectations begin to climb again. Market participants said the scale and speed of the oil rally had already begun reshaping expectations across financial markets.

The latest moves underscore how quickly geopolitical tensions in key energy-producing regions can reverberate across global financial systems, affecting commodity markets, bond yields and investor risk sentiment.

Brent crude futures rose as much as $18.35, or 19.8%, to $111.04 a barrel and were up $15.24, or 16.4%, at $107.93 by 0014 GMT. U.S. West Texas Intermediate crude climbed $16.50, or 18.2%, to $107.40 a barrel after earlier jumping as much as $20.34, or 22.4%, to $111.24.

The sharp gains followed steep rises last week, when Brent advanced 27% and WTI climbed 35.6%, as escalating hostilities in the Middle East disrupted production and heightened concerns over global energy supplies.

Several major producers in the region have begun reducing output as the war affects export routes and storage capacity.

Oil production in Iraq from its main southern fields has dropped by about 70% to roughly 1.3 million barrels per day because exports through the Strait of Hormuz have been blocked by the conflict, according to three industry sources.An official with the state-run Basra Oil Company said crude storage facilities had reached maximum capacity.

Meanwhile, Kuwait Petroleum Corporation began cutting oil production on Saturday and declared force majeure on shipments, although it did not disclose the scale of the reductions.Earlier supply disruptions also included reductions in liquefied natural gas shipments from Qatar as the regional conflict affected export logistics.

Market participants have focused on the security of shipping routes through the Strait of Hormuz, one of the world’s most important oil transit chokepoints.

Analysts say prolonged disruptions could leave global consumers and businesses facing elevated fuel prices for weeks or months even if the conflict ends quickly, as producers cope with damaged facilities, logistical disruptions and increased risks to tanker traffic.

“I think prices have rallied this morning on the reports that Middle East producers are now reducing output due to storage facilities filling up fast,” said Daniel Hynes, senior commodity strategist at ANZ.

Hynes added that producers could soon be forced to shut down wells if storage limits are reached, which would further tighten supply and delay any recovery in output once the conflict eases.

Energy infrastructure across the region has also faced security threats.The Fujairah Media Office said a fire broke out in the UAE’s Fujairah oil industry zone after debris fell in the area, though no injuries were reported. Separately, Saudi Arabia said its defence ministry intercepted a drone heading toward the Shaybah oilfield.

The market reaction has also been influenced by political developments in Iran. Tehran on Monday named Mojtaba Khamenei as the new supreme leader following the death of his father, Ali Khamenei, signalling continued hardline leadership amid the conflict.

“With the appointment of the late leader’s son as Iran’s new leader, U.S. President Donald Trump’s goal of regime change in Iran has become more difficult,” said Satoru Yoshida, a commodity analyst at Rakuten Securities.

Yoshida said the development could intensify concerns that Iran will continue actions affecting shipping routes and energy infrastructure, a scenario that could push oil prices higher.

As prices climbed, U.S. Senate Democratic leader Chuck Schumer called on the administration to release crude from the Strategic Petroleum Reserve to stabilise markets and reduce price pressures on consumers.

The search for stability has intensified as financial markets respond sharply to the conflict, with currencies and commodities moving unpredictably. The dollar has rebounded after a period of weakness over the past year, while traditional refuge currencies such as the Swiss franc and Japanese yen have weakened. Gold, meanwhile, has retained its appeal despite bouts of volatility.dollar regains defensive roleThe U.S. dollar has strengthened as investors reassess its role as a defensive asset during geopolitical shocks. Analysts say the currency’s response partly reflects the United States’ position as a net energy exporter, which can benefit when oil prices surge during conflicts.Benchmark Brent Crude climbed above $80 a barrel as tensions in the Middle East raised concerns about supply disruptions, a move that analysts say can support the U.S. economy relative to energy-importing nations.“The dollar has some safe-haven characteristics, but it is context specific,” said James Lord, head of FX strategy at Morgan Stanley.However, Lord added that the currency’s traditional haven role is not guaranteed. Policy uncertainty in the United States has weakened some of the structural factors that previously made the dollar a default refuge in times of global stress.gold’s long-term appeal persistsDespite recent price swings, gold continues to hold strong credibility as a safe-haven asset among investors.

Analysts note that the metal has surged about 240% since the start of the decade, reflecting persistent demand amid concerns over inflation, geopolitical tensions and rising global debt.Gold prices dropped sharply earlier in the week, a move market participants attributed partly to investors selling profitable positions to offset losses in other assets as market sentiment deteriorated.Still, analysts say that short-term volatility does not undermine gold’s broader appeal during periods of uncertainty. The metal’s reputation as a store of value often draws inflows during crises involving inflation risks, geopolitical tensions or financial instability.shifting behaviour of haven assetsThe current market environment highlights how traditional defensive assets can behave differently depending on the underlying cause of market turmoil.While the dollar has regained some safe-haven demand during the latest bout of geopolitical tension, currencies such as the Swiss franc and the Japanese yen often considered classic refuges have weakened.Analysts say the divergence reflects the complexity of modern global markets, where energy dynamics, policy expectations and investor positioning can alter how traditional havens perform.The renewed volatility across currencies, commodities and bonds underscores the challenge investors face in identifying reliable protection during geopolitical shocks. With markets adjusting rapidly to developments in the Middle East, investors continue to reassess which assets offer the most consistent shelter during periods of heightened uncertainty.