Oil prices jumped more than five per cent in Monday trading on fears that a fragile ceasefire between the US and Iran could break down after the US seized an Iranian cargo ship and traffic through the Strait of Hormuz remained largely halted.
Brent crude futures advanced $5.08, or 5.62 per cent, to $95.46 a barrel by 13:19 ET (17:19 GMT) and US West Texas Intermediate was up $5.04, or 6.01 per cent, at $88.89. Both contracts had tumbled by nine per cent on Friday for their largest daily declines since April 18 after Iran said that passage for all commercial vessels through the Strait of Hormuz was open for the remainder of the ceasefire.
US President Donald Trump, meanwhile, said that Iran had agreed never again to close the strait through which about a fifth of the world's oil supply passed before the war began almost two months ago.
"The strait remains under a double blockade," said Nikos Tzabouras, market analyst at Tradu, noting a looming ceasefire deadline and uncertainty over any agreement being reached.
"These factors can push crude even higher and, even if a resolution is achieved, it will be hard for prices to return to pre-war levels as supply is unlikely to be restored overnight."
The United States said on Sunday that it had seized an Iranian cargo ship that tried to break through its blockade while Iran said it would retaliate, heightening fears of a resumption in hostilities. Iran is considering attending the peace talks, a senior Iranian official told Reuters on Monday, but no decision had been made.
Trump, asked over the weekend about the chance of an extension, said: "I don't know. Maybe not. Maybe I won't extend it. But the blockade is going to remain."
"The volatility is going to continue, but even with the increased tensions, WTI is below $100 a barrel and gasoline prices are trending lower," said Phil Flynn, senior analyst with Price Futures Group.
"We're starting to see that the market is starting to adjust. High prices start to cure high prices."
Shipping traffic through the Strait of Hormuz remained at a virtual standstill on Monday, with only three crossings in the past 12 hours, shipping data showed.
More than 20 ships passed through the strait on Saturday, carrying oil, liquefied petroleum gas, metals and fertilisers, Kpler data showed. That was the highest number of vessels crossing the waterway since March 1.
Elsewhere, China is curtailing refined fuel exports rather than banning them, with countries including Malaysia and Australia receiving supplies even after Beijing extended last month's restriction into April, according to shipping data and traders.
(Reporting by Nicole Jao in New York, Stephanie Kelly in London, Florence Tan and Siyi Liu in Singapore Editing by David Goodman and Nick Zieminski)
