Oil prices continued their upward trajectory on Monday as the prospect for peace in the Middle East dimmed further following a drone attack on a nuclear power plant in the United Arab Emirates.
At 10:02 GMT, Brent crude futures rose by 86 cents, or 0.79%, to $110.12 per barrel, having earlier reached $112, marking its highest level since May 5th.
U.S. West Texas Intermediate crude increased by 89 cents, or 0.84%, to $106.31, after touching $108.70, its peak since April 30th. The front-month June contract is set to expire on Tuesday.
Last week, both benchmark contracts gained over 7% as hopes for a peaceful resolution to attacks and seizures of vessels around the Strait of Hormuz shipping route faded.
"Currently, about 1 billion barrels of oil are trapped behind the Strait," said Tamas Varga, an analyst at PVM. "The sharp price rise on Friday (with WTI gaining $10 for the week) was influenced not only by the heated rhetoric between the U.S. and Iran but also by continued attacks on regional production facilities and commercial vessels."
A Pakistani source informed Reuters on Monday that Pakistan had relayed a revised Iranian proposal aimed at ending the Middle East conflict to the United States, although peace talks appear to remain deadlocked.
Fatih Birol, the head of the International Energy Agency, stated on Monday that commercial crude oil inventories are being depleted rapidly, with only a few weeks of supply remaining.
Drone attacks targeting the UAE and Saudi Arabia, coupled with tough rhetoric from both the U.S. and Iran, have heightened market concerns about an escalation in the conflict.
Saudi Arabia intercepted three drones that entered its airspace from Iraq and warned it would take necessary military action against any infringement of its sovereignty and security.
UAE officials stated they are investigating the source of the attack on the Barakah nuclear power plant and added that the UAE reserves the right to respond to what it termed a "terrorist attack."
Media reports on Sunday, citing U.S. officials, indicated that the former U.S. President is expected to meet with national security advisors on Tuesday to discuss military options.
The previous U.S. administration allowed a sanctions waiver to expire on Saturday. This waiver, previously extended for a month, had permitted countries like India to purchase Russian seaborne crude oil.
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