Israel and Iran exchanged fresh missile strikes on Monday, driving oil prices sharply higher and fueling fears that the United States could escalate the conflict with potential ground raids on Iran’s Gulf islands.

Iran retaliated with new attacks on a water desalination plant in Kuwait after domestic electrical facilities were hit over the weekend, leaving parts of Tehran without power. Saudi Arabia reported intercepting five ballistic missiles amid the rising hostilities.

The ongoing conflict has wreaked havoc on global markets. Fuel shortages are spreading across much of Asia, stock markets are unsettled, and oil prices have surged—Brent crude in London trading near $117 a barrel and the US benchmark exceeding $100. Analysts warn that any US ground intervention or expanded Iranian retaliation could push prices to unprecedented levels.

“If the US were to launch a ground invasion of Iran, possibly taking the Kharg Island, or if Tehran were to intensify retaliatory strikes on energy infrastructure or fully close the Strait, projections of $200 bbl oil will not be an otherworldly supposition anymore,” said Tamas Varga of PVM Energy.

While oil has never surpassed $150 a barrel, last peaking during the July 2008 commodity boom, Brent has risen nearly 60 percent since the conflict began, with WTI increasing by over 50 percent.

In an interview with the Financial Times, US President Donald Trump said he intends to “take the oil in Iran” and could seize the Kharg Island export hub, drawing parallels with the US operation in Venezuela following the capture of Nicolas Maduro in January. Despite these remarks, Trump expressed optimism for a negotiated end to the conflict, as Pakistan hosts regional foreign ministers for talks.

The fighting continues on multiple fronts. Israel intensified its operations against Hezbollah in southern Lebanon, striking an army checkpoint and killing at least one Lebanese soldier, according to an AFP official. Meanwhile, Indonesia confirmed the death of one peacekeeper after a projectile hit a UN position. The Israeli military also reported the death of a soldier on Sunday in southern Lebanon, bringing the total to six since hostilities with Hezbollah escalated this month. Israel stated its air defence responded to “missiles launched from Iran” following attacks on what it described as “terror regime military infrastructure across Tehran.”

On the diplomatic front, Pakistan, serving as an intermediary between Washington and Tehran, convened foreign ministers from Saudi Arabia, Turkey, and Egypt in Islamabad to seek a resolution. Pakistan’s Foreign Minister Dar noted that the visiting diplomats discussed ways to “bring an early and permanent end to the war.” He added that both Iran and the United States expressed “confidence in Pakistan to facilitate the talks,” and he had spoken with his Chinese counterpart Wang Yi, UN Secretary-General Antonio Guterres, and other foreign ministers who supported the initiative. However, Iran’s parliament speaker accused Washington of using diplomacy as a “smoke screen.”

Despite diplomatic efforts, including a 15-point US proposal to end the war, the United States has also increased military presence in the region, deploying an amphibious assault ship carrying 3,500 Marines.

The human toll of the strikes is apparent. Iran confirmed that last week’s Israeli strike killed Alireza Tangsiri, commander of the Revolutionary Guards’ naval force, whom Israel held responsible for efforts to block the Strait of Hormuz. “I miss a peaceful night’s sleep,” an artist in Tehran told AFP. “The night-time strikes are so intense it felt like all of Tehran was shaking.”

The war has now escalated into a broader regional crisis. Tehran’s retaliatory strikes on Gulf states and near-total closure of the Strait of Hormuz, a key shipping lane that once handled a quarter of the world’s seaborne oil and a fifth of liquefied natural gas shipments, have intensified fears of a global energy shock. Iran says it has closed the Strait to vessels from hostile nations, heightening global concern over oil and gas supplies.