Oil prices rose after the United States attacked Iranian tankers, and Tehran threatened to declare a new restricted zone outside the Strait of Hormuz, raising concerns about prolonged disruptions to energy flows through the waterway.
Brent crude rose as much as 0.8% to trade near $97 a barrel at the open, while West Texas Intermediate was around $92. European natural gas prices climbed as much as 4.2% in thin trading.
The United States said it launched strikes against three Iranian oil tankers over the weekend, destroying one of them, in response to ballistic missile attacks targeting U.S. Navy warships.
Iran intends to declare a restricted zone
In response, Iran’s top security official said a new no-fly zone outside the Strait of Hormuz would be announced in the coming days, starting at the US Navy’s blockade line and extending into parts of the Persian Gulf, according to Press TV. Iran also claimed to have targeted three tankers, but there has been no independent confirmation of this.
Crude oil prices surged last week after renewed hostilities between the United States and Iran following a period of relative calm. Brent crude has risen by about 60% this year, while refined products such as diesel have seen even greater gains, fueled by the Middle East conflict and the war between Russia and Ukraine.
Harris Khurshid, chief investment officer at Chicago-based Karobaar Capital LP, said: “The market has repriced a significant amount of risk, but not the worst-case scenario. If shipping activity deteriorates further, or we start to see more sustained disruptions to crude oil supplies, then justifying a price of $100 becomes easier.”
For his part, US Energy Secretary Chris Wright stated that there would be no reduction in the US naval presence, which includes enforcing the blockade aimed at disrupting Iranian oil exports, as well as helping to ensure the safe passage of other commercial vessels through the Strait of Hormuz. Wright confirmed last week that millions of barrels of oil were flowing through the Strait of Hormuz daily.
Traders and industry executives are gathering in Singapore this week for the Asia Pacific Petroleum Conference, with the Iranian war, declining inventories, and Chinese demand forecasts expected to dominate the agenda.
Hedge funds increase their bets
Hedge funds have become more bullish on Brent crude since May following the recent escalation between the US and Iran, increasing their positions in the week ending September 1. Net bets on rising US crude have climbed to their highest level since June.
U.S. Central Command said on Saturday that one of the tankers it targeted, the Swissmax Kilo, sank in the Gulf of Oman. It also said that the Stark 1 tanker was disabled, along with the very large crude carrier Downey, near Kharg Island, a major oil export hub in Iran.
Dan Struveen, co-head of global commodities research at Goldman Sachs Group, said in an interview with Bloomberg Television: “In a bullish scenario, where shipping attacks widen and intensify, we see Brent potentially reaching $120.”
He added: The events of the past few days already indicate that the risk of shipping disruptions widening and escalating is a significant one.
In a related context, polls show that Americans give President Donald Trump a poor rating for his handling of the Iran war, which has fueled rising energy prices ahead of the midterm elections in November.
On Friday, Trump described the conflict, in which 18 U.S. troops were killed, as trivial, while Vice President J.D. Vance said he would not call it a war.
Latest price movements
Brent crude futures for November settlement rose 0.5% to $96.79 a barrel by 10:19 a.m. in Singapore.
West Texas Intermediate crude for October delivery rose 0.6% to $92.04 a barrel.
