Oil prices extended gains on Monday as efforts to end the U.S.-Israeli war on Iran appeared to have stalled, after a nuclear power plant in the United Arab Emirates came under attack and as U.S. President Donald Trump is expected to discuss military options on Iran. Brent crude futures climbed $2.03, or 1.86%, to $111.29 a barrel by 0220GMT, after touching $112 earlier, the highest since May 5. U.S. West Texas Intermediate crude was at $107.73 a barrel, up $2.31, or 2.19%, following a rise to $108.70, its highest level since April 30. The front-month June contract expires on Tuesday.
Both contracts gained more than 7% last week as hopes of a peace deal that would end ship attacks and seizures around the Strait of Hormuz dimmed. Last week’s talks between Trump and Chinese President Xi Jinping ended without an indication from the world’s top oil importer that it would help resolve the conflict.
“The longer the conflict with Iran persists, the greater the risk of protracted oil price scarring, which could keep interest rates higher for longer,” Prestige Economics’ Jason Schenker said in a note.
“This could also present persistent downside risks to growth.”
Drone attacks on the UAE and Saudi Arabia and rhetoric from the U.S. and Iran raised concerns of an escalation in the conflict.
Emirati officials said they were investigating the source of the strike on the Barakah nuclear power plant and that the UAE had the full right to respond to such “terrorist attacks.”
Saudi Arabia, which intercepted three drones that entered from Iraqi airspace, warned it would take the necessary operational measures to respond to any attempt to violate its sovereignty and security.
“These drone strikes are a pointed warning – renewed U.S. or Israeli strikes on Iran could trigger more proxy attacks on Gulf energy and critical infrastructure by Iran or its regional proxies,” IG market analyst Tony Sycamore said. Trump is expected to meet top national security advisers on Tuesday to discuss options for military action regarding Iran, Axios reported. Separately, in a move that could support oil prices, the Trump administration on Saturday allowed a sanctions waiver to lapse that had previously allowed countries including India to buy Russian seaborne oil after a month-long extension.
(Reporting by Florence Tan; Editing by Edmund Klamann, Chris Reese and Kate Mayberry)