Oil prices continued moving higher on Monday as hopes for a resolution to the conflict involving Iran weakened following an attack on a nuclear power plant in the United Arab Emirates and reports that U.S. President Donald Trump is preparing to review military options related to Iran.
Crude prices extend rally
Brent crude futures rose $1.65, or 1.51%, to $110.91 per barrel by 07:03 GMT, although prices eased slightly after earlier touching $112 per barrel, the highest level since May 5.
U.S. West Texas Intermediate crude traded at $107.42 per barrel, up $2, or 1.9%, after reaching an intraday high of $108.70, its strongest level since April 30. The June front-month contract is set to expire on Tuesday.
Both oil benchmarks advanced more than 7% last week as expectations faded for a diplomatic agreement capable of ending attacks and vessel seizures around the Strait of Hormuz, one of the world’s most strategically important shipping routes.
Geopolitical tensions intensify
Recent talks between Trump and Chinese President Xi Jinping ended without any indication that China, the world’s largest crude importer, would assist in easing the conflict triggered by the joint U.S.-Israeli strikes on Iran.
Fresh drone attacks targeting the UAE and Saudi Arabia, combined with escalating rhetoric from both Washington and Tehran, heightened fears that the conflict could broaden further.
“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.
Officials in the UAE said authorities are investigating the origin of the strike on the Barakah nuclear facility, adding that the country reserves the full right to respond to such “terrorist attacks”.
Saudi Arabia, which reported intercepting three drones entering from Iraqi airspace, warned that it would take all necessary operational steps to defend its sovereignty and national security.
Trump expected to review military options
According to Axios, Trump is expected to meet senior national security advisers on Tuesday to discuss possible military responses involving Iran.
Oil prices also received additional support after the Trump administration allowed a sanctions waiver to expire on Saturday. The waiver had temporarily permitted countries including India to continue purchasing Russian seaborne oil following a 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 analysis firm Vanda Insights.