Oil Jumps 3% as US-Iran Strikes Tighten Strait of Hormuz

Oil prices jumped about 3% on Monday, with Brent crude futures climbing above $90 a barrel, as escalating US-Iran hostilities in the Middle East disrupted shipping through the Strait of Hormuz.

Brent crude settled at $90.87, up $2.77, after touching the highest level since June 11. The contract rose 15.9% last week, its biggest weekly gain since April. West Texas Intermediate crude reached $84.84 a barrel, up $2.35, marking a 15.5% weekly advance.

The conflict deepened over the weekend. The US conducted a ninth consecutive night of strikes against Iran, while allies Kuwait and Bahrain reported more Iranian attacks. The Islamic Revolutionary Guard Corps said two oil tankers had exploded and been immobilised after attempting to transit what it described as an unsafe southern route through the Strait of Hormuz. The Guard alleged the vessels had been encouraged by the US military to use the passage. Reuters could not independently verify the incident.

Both sides have taken aim at shipping traffic. The US says it is enforcing a naval blockade on Iranian ports. Iran says it targets vessels violating its rules on navigating the Strait of Hormuz, which normally handles about one-fifth of global oil trade. A vessel was on fire northwest of Oman's Kumzar, the United Kingdom Maritime Trade Operations centre reported early Monday.

"ICE Brent broke above $90 per barrel this morning with no let-up in the escalation in the Gulf," ING analysts wrote in a note. "The US and Iran continue to exchange strikes, which are proving to be deadly for both sides. If this escalation goes unchecked, we could return to an environment of wide-scale attacks across the Gulf."

ING's Alpha Score stands at 75 out of 100, with a Strong label, according to AlphaScala data.

Barclays analyst Amarpreet Singh struck a cautious tone. "The coming days and weeks will provide a clearer picture of the sustainable level of oil exports from the region under renewed dual blockades," Singh said. "As things stand, we think oil markets are still too complacent about the potential fallout for inventories, which, unlike at the beginning of the war, are at the tightest of the past five years."

Four vessels made the transit through the Strait of Hormuz on Sunday, down from eight the previous day, LSEG data showed. At least three oil products tankers and one very large crude carrier have entered the strait since Friday to load oil.