Oil prices rose to a six-week high on Monday as Iran vowed to strike energy infrastructure across the Middle East in response to further US attacks on its assets, the latest escalation in a conflict that has sharply reduced oil supply from the region.
Brent crude futures rose 85 cents, or 0.9 per cent, to $97.13 a barrel by 12:38 EDT (16:38 GMT), after hitting their highest point since July 24 at $98.06.
US West Texas Intermediate crude was up 1.3 per cent, or $1.15, at $92.63 a barrel. WTI futures earlier rose as high as $93.29, also the highest since July 24.
"Strike our assets and you get struck," Iranian Parliament Speaker Mohammad Baqer Qalibaf said on Monday, in what appeared to be a response to US Defence Secretary Pete Hegseth's warning that Tehran's oil fleet was "defenceless".
The United States and Iran traded strikes on oil tankers and warships over the weekend, marking a major escalation of the war between the two countries that began when the US and Israel struck Iran on February 28, maritime intelligence firm Marisks said.
"Commercial tankers are now being deliberately used as instruments of reciprocal economic pressure, substantially weakening the previous distinction between military confrontation and commercial shipping," Marisks said.
Brent rose around eight per cent last week and WTI gained nearly 10 per cent, after the US and Iran resumed attacks. The war has taken a heavy toll on global oil supply, forcing nations to burn through stockpiles to avoid deficits.
In the United States, the largest oil producer and consumer, inventories of gasoline and distillate fuel are substantially below year-ago and five-year seasonal averages, PVM Energy analysts noted.
"The current roundup indicates a slightly more dire picture than the last time we took stock a few weeks ago," they said.
Regional tensions were also heightened by Israeli strikes on a town in southern Lebanon that killed at least 12 people on Monday, according to the Lebanese health ministry, marking one of the deadliest days of bombardment in recent weeks.
Elsewhere in the Middle East, Saudi Aramco's Jazan oil refinery was also attacked on Monday and damage was being ascertained, the Financial Times reported, citing two people with knowledge of the matter.
A week ago a Saudi-owned tanker was attacked by Iran, with Saudi Arabia saying two seafarers had died. Oman said on Monday it had evacuated 16 crew members from the tanker.
An average of 10 commodity ships transited the Strait of Hormuz per day over the past 10 days, the lowest since May, data from analytics firm Kpler showed on Monday.
"If tanker traffic begins to slow materially, the market could price in a much larger supply shock. And there are already signs that this is happening," said Priyanka Sachdeva, head of market insights at Phillip Nova.
Goldman Sachs said oil prices may rally as high as $120 a barrel if attacks on shipping rise.
Iran will announce a restricted zone outside the Strait of Hormuz in the coming days, said Mohsen Rezaei, the secretary of Iran's Supreme National Security Council.
Meanwhile, the United Arab Emirates is building alternative routes for its energy exports and trade to ensure they are not, "held hostage," by the war between the US and Iran, UAE presidential adviser Anwar Gargash said on Monday.
OPEC+ kept its oil output policy unchanged for October at a meeting on Sunday, the producer group said in a statement, as it needs to agree on new quotas before deciding its next output steps.
(Reporting by Shariq Khan, Shadia Nasralla; Additional reporting by Florence Tan, Sam Li and Anushree Mukherjee; Editing by Susan Fenton, Jan Harvey and Edmund Klamann)