Oil prices rose after a report that the White House had asked the Pentagon to prepare options for striking Iran that could be implemented before the midterm elections, at a time when a hurricane had halted some US crude production.
Brent crude rose above $102 a barrel, while West Texas Intermediate crude approached $90.
The report, published by The Atlantic magazine, was based on two administration officials and contradicts the widespread assumption that President Donald Trump would avoid escalating the conflict with Tehran before next month's election.
The Atlantic reported that the scale and targets of potential strikes, and whether the administration would proceed with them, remain under discussion. It added that a limited operation might be followed by larger actions after the midterm elections.
Production cuts in the Gulf of America
Meanwhile, producers in the Gulf of Mexico shut in more than 510,000 barrels per day of crude production, roughly a quarter of the region's supply, as Tropical Storm Isaias, expected to strengthen into a hurricane, approached. Isaias was forecast to make landfall on the northern Gulf Coast Friday night.
Crude oil prices have risen sharply this year as the conflict between the United States and Iran has disrupted exports and damaged infrastructure, depleting energy stocks and fueling accelerating global inflation. While energy exports from the Middle East have increased in recent weeks, attacks on ships have also intensified.
Recent incidents included an attack on a tanker in waters off Qatar, with reports of casualties, according to the UK Maritime Trade Operations (UKMTO). The vessel was targeted north of Al Shamal, a city on the northern edge of the emirate, in the first reported attack on a ship in the Arabian Gulf in nearly a month.
In the United States, President Donald Trump, speaking at a campaign rally in San Antonio, Texas, confirmed that he is in no hurry to reach an agreement with Iran.
U.S. Central Command, which oversees Washington's military operations in the region, said that 20 million barrels of crude oil were flowing through the Strait of Hormuz, according to a social media post, without specifying a timeframe. This is equivalent to the daily flows before the conflict, although higher than estimates given by some industry leaders at a conference this week.
Saul Kavonic, senior energy analyst at MST Marquee, believes that flows from the Middle East have recovered, but limited product supplies, high logistics costs, and the high risk of Iranian escalation are keeping prices high.
The coalition destroys 82 Houthi targets
In a related development, the Iranian-backed Houthi rebels targeted two airports in Saudi Arabia, killing three people, in a significant escalation against the kingdom as the group battles government forces in Yemen. In response, the Saudi-led coalition said it destroyed 82 targets in Saada, Hodeidah, al-Jawf, and Marib.
Regional risks, attacks on ships, and demand for crude from more distant loading points are driving up shipping rates to historic highs, adding huge costs to the supply chain. Chartering a very large crude carrier (VLCC) to transport US oil to Asia now costs $77 million, up from an average of $9.2 million last year.
Analysts at Citigroup, including Eric Lee, wrote in a note that shipping costs have become excessively high, adding: The market continues to price in supply shortages, fragile supply, and geopolitical risks rather than relying solely on reported export data.
In the United States, official data showed that total crude and product exports last week reached their highest level since May, returning to a seasonal record and highlighting the strength of external demand. Crude oil inventories fell by 3.2 million barrels.
Latest oil price movements
Brent crude futures for December settlement rose 2.3% to $102.46 a barrel at 6:08 a.m. in London.
The price of West Texas Intermediate crude oil futures for November delivery rose 1.9% to $89.95 a barrel.
West Texas Intermediate crude for November delivery rose 0.9% to $89.10 a barrel.
