Crude Oil Climbs Back Above $110 As Iran War Tensions Deepen

Oil prices pushed higher on Monday as hopes of a diplomatic resolution to the US-Iran conflict faded and fresh drone strikes on Gulf infrastructure added to fears of a wider regional escalation.

On Monday morning, Brent crude futures rose 1.32% to $110.70 a barrel, touching their highest level since 5 May. West Texas Intermediate crude climbed more than 1% to $107.26 a barrel, hitting its strongest point since 4 May.

Both benchmarks had already surged more than 7% the previous week as peace deal expectations weakened and attacks around the Strait of Hormuz continued. Crude prices have risen more than 50% since the United States and Israel first struck Iran.

What Drove Monday's Move

A drone attack on the Barakah nuclear power plant in the UAE escalated an already tense situation. UAE officials said they were investigating the source of the strike and reserved the right to respond to what they described as terrorist attacks. Fresh drone attacks targeting Saudi Arabia were also reported on the same day.

In Washington, President Donald Trump posted on social media warning Iran that the clock was ticking and that the country needed to move fast or there would be nothing left of it. He is also expected to meet senior national security advisers on Tuesday to discuss possible military action, according to a report by Axios.

The Strait Of Hormuz Remains The Central Risk

Analysts described the oil market as being in a race against time, warning that factors currently preventing a sharper price spike could weaken if the Strait of Hormuz remains shut into June. Disruptions affecting close to 1 billion barrels of oil supply have already accumulated, though prices remain below the peaks seen in 2022 following Russia's invasion of Ukraine.

The difference, according to analysts, is that the market entered the current crisis with stronger supply buffers and investor positioning was not as stretched.

Also Read - India Curbs Silver Imports As Domestic Supply Tightens

Where Prices Are Headed

Brent crude has advanced toward $112 a barrel in early trading, while West Texas Intermediate has pushed above $107. The trajectory from here depends almost entirely on how the geopolitical situation develops.

If the Strait of Hormuz remains closed and Gulf infrastructure continues to be targeted, the supply shock intensifies and prices have room to move higher. If diplomatic channels reopen or military action is contained, the supply buffer that has so far moderated the spike could allow prices to stabilise.

Sources:

Economic Times

Moneycontrol