Oil prices jumped Monday after the US struck Iran's Larak Island in the Strait of Hormuz and Iran retaliated against two US air bases in Jordan, extending the conflict into its sixth month. Brent and WTI both rebounded from last week's losses as mediators struggle to reopen the strait, and Washington signaled more sanctions are coming.
Oil prices rose nearly 2% on Monday after the United States struck Iran's Larak Island in the Strait of Hormuz, drawing retaliation from Tehran and extending their conflict into its sixth month. Brent crude climbed $1.77, or 2%, to $89.87 a barrel by 0733 GMT. US West Texas Intermediate crude rose $1.45, or 1.74%, to $84.85 over the same period.
US strikes Larak Island, Iran hits back in Jordan
American forces struck two launchers on Iran's Larak Island in the Strait of Hormuz on Sunday, the first known US strikes on the country since late July. In response, Iran attacked two US air bases in Jordan, Iranian media reported Monday, citing the country's Revolutionary Guards.
President Trump said in a social media post that Iran's Kharg Island energy hub was, according to Reuters: "blown to smithereens". The post carried no further detail and no evidence the island had been struck; Iran denied the attack and said its oil operations continued.
Hormuz reopening talks stall as ship traffic thins
Negotiations to end the conflict remain at an impasse while mediators work to reopen the Strait of Hormuz, through which a fifth of the world's oil flowed before the war began at the end of February. DBS head of energy research Suvro Sarkar said he sees more chances of contained confrontation than sustained escalation, and expects oil to stay rangebound between $85 and $95 a barrel, though he added that every flare-up delays the strait's reopening timeline further.
As a result, the number of visible commodity vessels crossing the strait over the weekend fell to five a day, shipping data showed Monday, reflecting caution among companies wary of attacks on ships. The UK Maritime Trade Operations reported a tanker was struck by a projectile while sailing inbound through the strait on Saturday.
Sanctions loom, speculators trim bullish bets
US Treasury Secretary Scott Bessent told Reuters the US is likely to issue new secondary sanctions on Iran weekly. Even after Monday's rebound, Brent and WTI are still set to post small declines for August after falling more than 4% last week, their first weekly decline in three.
ICE Brent briefly moved back above $90 a barrel in early Asian trading. Speculators cut their net long position in ICE Brent by 28,299 lots to 223,598 lots as of last Tuesday, driven mainly by long liquidation.
Trump said crude oil from a recently struck deal with Venezuela will be used to replenish the US Strategic Petroleum Reserve, which has dropped near its lowest level in 44 years.
Sources: Commodities & Futures News, Commodities Analysis & Opinion
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