Oil prices rise as US-Iran clashes renew fears over Strait of Hormuz

Oil prices rose more than $1 a barrel on Monday after US forces struck Iranian military equipment in the Strait of Hormuz and Tehran retaliated, renewing concerns about crude supplies and shipping through the strategic waterway.

LONDON: Oil prices rose more than $1 a barrel on Monday after US forces struck Iranian military equipment in the Strait of Hormuz and Tehran retaliated, renewing concerns about crude supplies and shipping through the strategic waterway.

Brent crude futures rose $1.08, or 1.23 percent, to $89.18 a barrel at 0040 GMT. US West Texas Intermediate crude gained 92 cents, or 1.10 percent, to $84.32.

The latest clashes came as the Middle East conflict entered its sixth month and followed a period in which oil markets had begun to anticipate a gradual easing of disruptions around Hormuz.

US forces struck two Iranian missile launchers on Larak Island in the Strait of Hormuz on Sunday, according to a US official. The official said the launchers were being prepared to fire rockets carrying sea mines into the waterway.

Iran’s Islamic Revolutionary Guard Corps responded by attacking two US air bases in Jordan, Iranian media reported on Monday.

“Looks like we are in another escalation phase,” said Tony Sycamore, an analyst at IG Markets. “How long that lasts is impossible to determine. Could be days, could be weeks.”

The Strait of Hormuz is one of the world’s most important energy chokepoints. It connects the oil-producing Gulf states with global markets.

Before the conflict began in late February, about a fifth of the world’s oil supply passed through the strait.

Shipping data showed that the number of visible commodity vessels crossing Hormuz fell to about five a day over the weekend. Operators have remained cautious amid attacks on commercial vessels.

The actual number of crossings could be higher because some ships have switched off their automatic identification systems to avoid detection, according to shipping data.

The United Kingdom Maritime Trade Operations agency said Sunday that a tanker was struck by a projectile while sailing inbound through the strait on Saturday.

“While the path to a deal to reopen the strait is elusive, increases in oil flows through the Hormuz strait kept concern over supply disruption in check,” ANZ analysts said in a client note.

Analysts said renewed fighting could disrupt tanker movements or threaten Gulf producers’ ability to export crude.

Technical indicators suggested further gains for US crude if WTI breaks above resistance around $85.80-$85.90 a barrel, Sycamore said. The next targets would be last week’s high of $87.69 and July’s peak of $93.50.

Despite Monday’s rise, Brent and WTI were still on track for modest monthly declines in August. Both contracts fell more than 4 percent last week, their first weekly decline in three weeks.

Markets are also watching measures that could help offset potential supply disruptions.

US President Donald Trump said Sunday that oil from a recently announced deal with Venezuela would be used to replenish the US Strategic Petroleum Reserve.

The reserve has fallen close to its lowest level in 44 years.

The latest price increase highlights the oil market’s sensitivity to developments around Hormuz. Even a limited military escalation can quickly fuel concerns over the security of the vital energy route.