Oil jumps 3pc as US, Iran expand strikes in the Middle East

Oil prices climbed more than three percent on Monday, pushing Brent crude above $90 a barrel, as escalating hostilities between the United States and Iran disrupted shipping through the Strait of Hormuz.

Brent crude futures advanced 3.1 percent to $90.87 a barrel by 0612 GMT, their highest level since 11 June, after surging 15.9 percent last week—the strongest weekly gain since April.

US West Texas Intermediate (WTI) crude rose 2.9 percent to $84.84 a barrel, its highest since 12 June. The benchmark climbed 15.5 percent last week, marking its biggest weekly advance since early March.

The conflict in the Middle East intensified over the weekend as the United States carried out a ninth consecutive night of strikes on Iran, while Kuwait and Bahrain reported further Iranian attacks.

"ICE Brent broke above $90 per barrel this morning with no let-up in the escalation in the Gulf," ING analysts said in a note on Monday.

"The US and Iran continue to exchange strikes, which are proving deadly for both sides. If this escalation goes unchecked, we could return to an environment of widespread attacks across the Gulf."

Iran's Islamic Revolutionary Guard Corps (IRGC) said on Monday that two oil tankers had exploded and been immobilised after attempting to transit what it described as an unsafe southern route through the Strait of Hormuz. It alleged the vessels had been encouraged by the US military to use the passage.

Reuters could not independently verify the claim.

In recent days, both sides have increasingly targeted maritime traffic. The United States says it is enforcing a naval blockade on Iranian ports, while Iran says it is targeting vessels that violate its navigation rules in the Strait of Hormuz, a waterway that carries about 20 percent of the world's oil trade.

The United Kingdom Maritime Trade Operations (UKMTO) centre said early on Monday that it had received a report of a vessel on fire north-west of Oman's Kumzar.

"The coming days and weeks will provide a clearer picture of the sustainable level of oil exports from the region under renewed dual blockades," Barclays analyst Amarpreet Singh said in a note.

"As things stand, we think oil markets are still too complacent about the potential fallout for inventories, which, unlike at the beginning of the war, are at their tightest levels in the past five years."

According to LSEG data, four vessels transited the Strait of Hormuz on Sunday, down from eight the previous day. Since Friday, at least three oil products tankers and one very large crude carrier have entered the strait to load crude oil.