Oil markets moved sharply higher on Monday as prospects for ending the conflict involving Iran appeared increasingly uncertain following a drone strike on a nuclear facility in the United Arab Emirates and reports that President Donald Trump is preparing to examine military responses related to Tehran.
Crude extends recent gains
Brent crude futures climbed $1.65, or 1.51%, to $110.91 per barrel by 07:03 GMT after earlier hitting $112, the highest price recorded since May 5.
U.S. West Texas Intermediate crude traded at $107.42 per barrel, up $2, or 1.9%, after touching an intraday peak of $108.70, its strongest level since April 30. The June contract is scheduled to expire on Tuesday.
Both oil benchmarks rallied more than 7% last week as confidence faded that diplomatic negotiations could end attacks and shipping disruptions near the Strait of Hormuz, a vital route for global energy supplies.
Concerns over wider regional escalation grow
Talks held last week between Trump and Chinese President Xi Jinping concluded without any indication that China would play a role in helping de-escalate the conflict triggered by the joint U.S.-Israeli strikes on Iran.
Additional drone attacks targeting the UAE and Saudi Arabia, together with increasingly aggressive rhetoric from both Washington and Tehran, reinforced fears of a broader regional conflict.
“These drone strikes are a pointed warning – renewed U.S. or Israeli strikes on Iran could trigger more proxy attacks on Gulf energy and critical infrastructure by Iran or its regional proxies,” IG market analyst Tony Sycamore said.
Authorities in the UAE confirmed they are investigating the source of the strike on the Barakah nuclear facility and stressed that the country maintains the right to respond to what it described as “terrorist attacks”.
Saudi Arabia, which intercepted three drones entering from Iraqi airspace, warned it would implement all necessary operational measures to safeguard national sovereignty and security.
U.S. sanctions and military discussions support oil market
Axios reported that Trump is expected to meet with senior national security officials on Tuesday to consider military options involving Iran.
Oil prices also received a boost after the Trump administration allowed a sanctions waiver on Russian seaborne oil exports to expire over the weekend. The waiver had previously enabled countries including India to continue purchases after a temporary one-month extension.
“Fears of renewed strikes on Iran have worsened supply fears … the United States letting the Russia sanctions waiver lapse didn’t help,” said Vandana Hari, founder of oil market consultancy Vanda Insights.
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