Oil prices climbed in Asia on Monday as escalating tensions in the U.S.-Iran conflict stoked concerns over potential supply disruptions in the Middle East.
The U.S. military said it struck three Iranian oil tankers on Saturday after Iran launched ballistic missiles toward two Navy warships, as the battle to assert control over the Strait of Hormuz intensified. The strait is a key waterway through which one-fifth of the oil is transported.
Iran's Islamic Revolutionary Guard Corps has fired ballistic missiles at U.S. forces throughout the conflict, but the attempted attack on the warships was perceived as a major escalation, U.S. officials said.
"The specter of oil flows returning to normal in the Middle East faded amid renewed attacks between the U.S. and Iran," ANZ Research analysts said in a note. "Any geopolitical breakthrough is difficult to envisage. A prolonged standoff, punctuated by calibrated military action by the U.S. and Iran, now appears the most likely scenario," they added.
Front-month West Texas Intermediate crude oil futures rose 1.1% to $92.50 a barrel, while front-month Brent crude oil futures advanced 1.1% to $97.34 a barrel.
Equity markets across the Asia-Pacific region were mixed as investors grappled with signs of U.S. economic resilience and expectations of interest-rate increases by the Federal Reserve.
South Korea's Kospi climbed 3.9%, Japan's Nikkei Stock Average rose 2.0% and Taiwan's Taiex added 1.6%. Meanwhile, Hong Kong's Hang Seng Index fell 1.0%, China's Shanghai Composite declined 0.2%, and India's BSE Sensex dropped 0.4%.
Data released by the U.S. Labor Department on Friday showed that employers added 162,000 jobs in August. This far exceeded the 53,000 positions projected by economists polled by The Wall Street Journal. The unemployment rate remained steady at 4.1%, in line with economists' expectations.
The data showed a "surprisingly strong labor market outcome," said Suan Teck Kin, head of research at UOB Global Economic & Markets Research, in a note. However, the data also bolstered "market expectations that the Fed needs to hike rates soon," he said.
"The probability of a Fed rate hike at the Sep FOMC meeting rose to 61% following the payrolls report," from 51% prior to the data release, he added.
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