Oil prices rose on Monday as U.S. strikes on Iran ramped up fears of supply disruptions in the Middle East, although crude did pare back some of its early gains.
Brent oil futures for August rose 0.3% to $75.73 a barrel, while West Texas Intermediate crude futures rose 0.2% to $74.01 a barrel by 09:01 ET (13:01 GMT).
Both contracts had initially surged as high as 4% to four-month highs, with Brent briefly rising as high as $81 a barrel. But oil retreated amid uncertainty over just how Iran will respond and what the White House’s stance was towards a conflict with Tehran.
U.S. attacks Iran nuclear facilities, Tehran response in focus
Washington over the weekend carried out a series of strikes targeting Iran’s three key nuclear facilities, drawing ire and threats of retaliation from the Islamic republic. Iran was seen launching some attacks against Israel in the early hours of Monday.
Iranian media reported that the country was considering blocking the Strait of Hormuz in retaliation for the strikes.
Such a move stands to cut off a key shipping lane in the Middle East, and could severely disrupt oil and gas supplies from the region.
The renewed Israel-Iran conflict, which entered its 11th day on Monday, has been a major point of support for oil, as markets feared potential supply disruptions.
Hostilities between Tehran and Washington could also see the latter impose more sanctions against Iran’s oil industry, further limiting supplies to parts of Asia and Europe.
Focus was now squarely on how Iran will respond, with reports suggesting that Tehran could target U.S. military bases in the Middle East.
Oil prices to average $90-$95/barrel amid Middle East escalation - ANZ
ANZ analysts said on Monday that the U.S. strikes on Iran marked a “severe escalation” in the conflict, with prices expected to trend between $90 and $95 a barrel.
They noted that the risk of Iran disrupting oil flows in the Middle East, especially through the Strait of Hormuz, had risen significantly, while non-military U.S. action against Iran, specifically fresh sanctions, was also possible.
ANZ analysts also said that Iran-U.S. nuclear talks appeared unlikely.
