Oil extends gains as Middle East conflict threatens export facilities

[SINGAPORE] Oil prices rose on Monday as investor focus returned to threats facing Middle East oil facilities, despite US President Donald Trump’s call for nations to help safeguard the Strait of Hormuz, a vital artery for global energy shipments.

Brent crude futures climbed US$1.27, or 1.2 per cent, to US$104.41 a barrel by 0400 GMT, after settling up US$2.68 on Friday. US West Texas Intermediate crude gained 54 cents, or 0.6 per cent, at US$99.25 a barrel, after settling up nearly US$3 in the previous session.

Both contracts have surged more than 40 per cent this month to their highest since 2022, after the US-Israeli attacks on Iran prompted Teheran to halt shipping through the Strait of Hormuz, choking off a fifth of global oil supply in the biggest disruption ever.

“US strikes over the weekend on Kharg Island raised supply concerns, as most of Iran’s oil exports pass through it,” ING commodity strategists said on Monday.

While the strikes appear to have targeted military, rather than energy, infrastructure, they still pose supply risks since Iranian oil is about the only oil moving through the Strait of Hormuz for now, ING added.

US President Donald Trump threatened further strikes on Iran’s Kharg Island oil export hub after hitting military targets over the weekend, drawing a defiant response of more retaliation from Teheran. Kharg Island handles about 90 per cent of Iran’s oil exports.

Iranian drones hit a key oil terminal in Fujairah in the United Arab Emirates shortly after the attacks on Kharg. Oil loading operations at Fujairah have since resumed, four sources said, but it was unclear if the operations were back to normal.

Fujairah, outside the Strait of Hormuz, is the outlet for about 1 million barrels per day of the UAE’s flagship Murban crude oil - a volume equal to about 1 per cent of world demand.

“The US is weighing high-risk ground options including raiding nuclear sites for Iran’s enriched uranium, seizing the Kharg Island oil hub, and occupying southern Iran to protect the Strait of Hormuz,” SEB analyst Erik Meyersson said in a note.

SEE ALSO

Costs running up for Singapore businesses as Gulf conflict jacks up energy prices

Singapore’s energy is secure despite disruptions from Middle East conflict: Tan See Leng

Trump administration to announce coalition to escort ships through Strait of Hormuz: WSJ

Gulf economies at risk of worst slump since 1990s on Iran war

Trump demands other countries help secure vital Strait of Hormuz

Iran holds the key to reopening global energy markets

Over 400 million barrels of emergency oil reserves to flow to global markets, starting with Asia immediately: IEA

More

“All of these imply significant escalation and require a tolerance for substantially higher risk.”

Trump has urged allies to deploy warships to help secure the strategic gateway. He plans to announce a coalition to escort ships through the Strait of Hormuz as soon as this week, the Wall Street Journal reported on Sunday.

Oil reserves

The International Energy Agency on Sunday said more than 400 million barrels of oil reserves will begin flowing to the market soon, a record draw aimed at combating price spikes caused by the Middle East war.

Stocks from Asia and Oceania countries will be released immediately and those from Europe and the Americas will be available at the end of March, the agency said.

Meanwhile, the Trump administration has rebuffed efforts by Middle Eastern allies to start diplomatic negotiations, according to three sources familiar with the efforts, while Iran has rejected the possibility of any ceasefire until the US and Israeli strikes end, dimming hopes of a quick end to the conflict.

“As the conflict enters its third week, the lack of a clear denouement has left global markets increasingly worried about an uncontrollable escalatory spiral,” SEB’s Meyersson said.

Still, US Energy Secretary Chris Wright said on Sunday that he expects the US war with Iran to end within “the next few weeks”, with oil supplies rebounding and energy costs declining afterwards. REUTERS