Oil prices jump 6% as Iran sets UAE oil port ablaze, strikes vessels in Strait of Hormuz

[NEW YORK] Oil prices jumped about 6 per cent on Monday (May 4) as Iran stepped up attacks on the United Arab Emirates and ships in the Middle East Gulf over the past 24 hours, the most serious escalation since a US-Iran ceasefire came into force in early April.

Brent futures rose US$6.27, or 5.8 per cent, to settle at US$114.44 per barrel, while US West Texas Intermediate (WTI) crude rose US$4.48, or 4.4 per cent, to settle at US$106.42.

Iran hit several ships in the Strait of Hormuz on Monday and set a UAE oil port ablaze, as US President Donald Trump’s attempt to use the US Navy to free up shipping provoked the war’s biggest escalation since a ceasefire was declared four weeks ago.

The UAE said that its air defences were engaging missile and drone threats on Monday evening as firefighters battled a blaze at a major oil industry zone following a drone attack that authorities said had originated from Iran.

The US military said that it destroyed six Iranian small boats and intercepted Iranian cruise missiles and drones fired by Teheran as it sought to thwart a new US naval effort to open shipping through the Strait of Hormuz.

Iran’s Revolutionary Guards Navy, meanwhile, issued a map that it said was expanding the areas controlled by Iran near the Strait of Hormuz to include the UAE’s ports of Fujairah and Khorfakkan as well as the coast of Umm Al Quwain emirate in the UAE, according to Iranian news agencies.

About 20 per cent of global oil and liquefied natural gas supplies passed through the strait before the US and Israel launched strikes against Iran on Feb 28.

“Oil will remain above US$100 and US petrol prices will reach US$5 a gallon by June ... without a deal to reopen the Strait of Hormuz,” analysts from consultancy Eurasia Group said in a note. Motorists in California were already paying US$6 a gallon for gasoline.

Earlier in the day, the US military said two US merchant ships had made it through the strait, without saying when. Iran denied any crossings had taken place.

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Vessels attacked in the Gulf

Iran may have attacked four ships in the Gulf region over the past 24 hours, including vessels from South Korea and the UAE. There was a fire and an explosion on a vessel operated by South Korean shipper HMM 011200. KS in the Strait of Hormuz on Monday, the foreign ministry in Seoul said.

The UAE accused Iran of attacking an empty crude oil tanker belonging to Abu Dhabi state oil firm ADNOC with drones as it attempted to transit the Strait. The United Kingdom Maritime Trade Operations (UKMTO), meanwhile, said that it received a report of an incident involving a cargo vessel about 36 nautical miles north of Dubai.

The UKMTO also reported a separate incident earlier in the day near the UAE. Separately, the energy minister in the UAE, which left Opec last week, said that the country owes it to its investment partners to produce what global oil markets require without restrictions, while cooperating with other crude producers.

Opec and its allies, known as Opec+, said that they would raise oil output targets by 188,000 barrels per day in June for seven members, marking the third consecutive monthly increase. REUTERS