Oil prices climbed roughly 2% on Monday, with Brent crude futures rising to $106.73 and West Texas Intermediate (WTI) crude futures reaching $93.72, as geopolitical tensions continued to pressure global energy markets.
The gains came despite recent hopes for de-escalation between the United States and Iran, after President Donald Trump indicated last week that his administration had no plans to attack Iran before the November 3 midterm elections. However, fresh attacks in the region and ongoing disruption risks have kept traders focused on the possibility of further supply constraints.
Middle East escalation back on the cards?
Trump's remarks had helped cool oil prices somewhat, but the security situation in the region remains volatile. Over the weekend, Yemen's Houthi militant group launched an attack on King Khalid International Airport in Riyadh, Saudi Arabia, leaving 12 people dead and more than 300 injured. The airport remains shut as Saudi Arabia deals with another round of missile attacks.
The Saudi government said Monday that it was facing a fresh escalation from the Iran-backed Houthis, whose recent advances in Yemen have helped them gain control of a key chokepoint near Bab el-Mandeb. Fears that further disruptions could restrict the flow of oil have added to the upward pressure on prices.
According to the UK Maritime Trade Operations, a tanker was struck by a drone near the Sohar anchorage in Oman over the weekend, while another vessel was damaged by an unknown projectile while transiting the Strait of Hormuz. Tanker attacks around the strait had already reached their highest weekly level since the Iran war began.
The possibility of further attacks along critical shipping routes has kept a geopolitical risk premium in oil prices, as traders remain concerned about whether supplies can continue flowing without interruption.
The Russian factor
The Russia-Ukraine conflict is adding another layer of uncertainty to the outlook for energy supplies. Trump had announced an "energy ceasefire" between Russia and Ukraine, raising hopes that a reduction in attacks on energy infrastructure could ease pressure on supplies. However, the arrangement appears to be facing difficulties.
Ukrainian President Volodymyr Zelenskyy said Monday that Moscow continued attacking Ukrainian energy facilities despite the ceasefire, with strikes hitting a power plant in Kharkiv, a gas production facility, and a civilian gas station. Meanwhile, The Guardian reported that Russia had rejected the "energy ceasefire," casting further doubt on the prospects for a reduction in attacks on energy infrastructure.
A lasting reduction in hostilities between the two countries could support oil prices moving lower by improving the outlook for Russian supplies returning to the market. Continued attacks, however, risk prolonging uncertainty around energy production and exports.
This article is for informational purposes only and does not constitute financial advice.
