Oil prices climbed over 3% on Monday, following retaliatory strikes between Iran and the United States and as Israel ordered its troops to advance further into Lebanon to fight the Iran-backed Hezbollah group.
At 0701 GMT, U.S. West Texas Intermediate crude futures were up $2.88, or 3.3%, at $90.24 a barrel. Brent crude futures rose $2.78, or 3.05%, to $93.90 a barrel.
The renewed fighting comes just after the U.S. hosted peace talks between Israel and Lebanon on Friday, dimming hopes for an imminent announcement of a ceasefire extension. On Friday, Brent and WTI had settled down 1.8% and 1.7% respectively, influenced by ceasefire expectations.
The United States said on Sunday it conducted "defensive strikes" over the weekend on radar and drone control sites on Iran's Goruk and Qeshm islands in response to what it called Iranian "aggressive" actions. Iran's Islamic Revolutionary Guard Corps said on Sunday its aerospace forces targeted a U.S. military base it said was involved in an American attack on a telecom tower on Sirik Island.
U.S. President Donald Trump said on Friday he would decide soon on whether to extend a ceasefire announced in early April to give negotiators more time to seek a permanent end to the war and resolve underlying disputes over Iran's nuclear program. Israel is key to any such deal, while Iran has repeatedly said Hezbollah must be included.
IG analyst Tony Sycamore noted that market concerns about mines in the Strait of Hormuz are intensifying, which will slow the process of reopening the shipping lane, meaning any relief for the oil market would come more slowly even if it does reopen. He stated, "Even if a deal is reached, it won't bring a flood of supply."
The Strait of Hormuz is a conduit for about one-fifth of the world's oil and gas shipments. Iran has effectively closed the strait since attacks by the U.S. and Israel on February 28.
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