Oil prices could extend gains at Monday’s open as the U.S.-Israeli war against Iran entered a third week, putting oil infrastructure at risk and keeping the Strait of Hormuz shut in the world’s largest supply disruption.
The International Energy Agency on Sunday said more than 400 million barrels of oil reserves will begin flowing to the market soon, a record draw aimed at combating price spikes caused by the Middle East war. Stocks from Asia Oceania will be released immediately and those from Europe and the Americas will be available at the end of March, the agency said.
Brent and U.S. West Texas Intermediate crude futures have surged more than 40% so far this month to their highest levels since 2022 after U.S.-Israeli attacks on Iran prompted Tehran to halt shipping through the Strait of Hormuz – a key chokepoint for a fifth of global oil supply.
U.S. President Donald Trump has urged allies to deploy warships to help secure the strategic gateway.
Trump also threatened more strikes on Iran’s Kharg Island oil export hub after the United States hit military targets there on Saturday. The threat drew a defiant response of further retaliation from Tehran.
Iranian drones hit a key oil terminal in Fujairah in the United Arab Emirates shortly after the attacks on Kharg.
“This marks an escalation in the conflict,” JP Morgan analyst Natasha Kaneva said.
Besides UAE’s Fujairah, Saudi Arabia’s Ras Tanura export terminal and Abqaiq oil processing facilities have been listed as critical and highly vulnerable energy facilities in the Gulf, JPM analysts said.
Oil loading operations at Fujairah have resumed, a Fujairah-based industry source told Reuters on Sunday.
Fujairah, outside the Strait of Hormuz, is the outlet for about 1 million barrels per day of the UAE’s flagship Murban crude oil – a volume equal to about 1% of world demand.
Global oil supply is expected to fall by 8 million barrels per day in March due to disruptions to shipping while Middle Eastern producers have cut output by at least 10 million bpd, according to the International Energy Agency.
U.S. Energy Secretary Chris Wright said on Sunday he expects the war with Iran to end within “the next few weeks”. Oil supplies will rebound and energy costs will decline afterwards, he added.
Meanwhile, the Trump administration has rebuffed efforts by Middle Eastern allies to start diplomatic negotiations, according to three sources familiar with the efforts, while Iran has rejected the possibility of any ceasefire until U.S. and Israeli strikes end, dimming hopes of a quick end to the conflict.
(Reporting by Florence Tan and Shariq Khan; Editing by Shri Navaratnam and Bill Berkrot)