Oil settles up by more than 2.5% as US and Iran resume military attacks

[HOUSTON] Oil prices settled more than 2.5 per cent higher on Monday (Aug 31) after a resumption of military action between the US and Iran rekindled market concerns about global supply disruption, as the conflict extended into its sixth month.

Brent crude futures settled up US$2.39, or 2.71 per cent, to US$90.49 a barrel. US West Texas Intermediate crude settled up US$2.36, or 2.83 per cent, to US$85.76. Brent rose as high as US $91.52 during the session, its highest since Aug 25.

US President Donald Trump was quoted as promising to “hit them hard” after Iran launched missiles overnight at two US air bases in Jordan in response to an attack on Iran’s Larak Island.

“We’re going to hit them hard,” a Fox News reporter quoted Trump as telling the channel. “There will be a response.”

Last week, crude stocks in the US Strategic Petroleum Reserve fell by around 3.1 million barrels to 286.6 million barrels.

Market focuses on whether situation will de-escalate

On Sunday, Trump said in a social media post that Iran’s energy hub of Kharg Island was being “blown to smithereens,” but there was no evidence the island was under attack.

The post, which included an AI-generated video, provided no further details. Iran denied the island was being attacked and said oil operations continued there.

On Monday, Vice-President JD Vance said Trump was sending a message to Iran with the post.

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Oil rises over 3% as US and Iran resume military attacks

Mediators are seeking a deal to reopen the Strait of Hormuz, through which a fifth of global oil supplies passed before the war began in late February. Progress has stalled.

Shipping data showed the number of visible commodity vessels transiting the strait over the weekend fell to five a day.

“Some Gulf barrels continue moving through the strait, tempering the rally, but the first direct military exchange in a month has forced traders to rebuild a meaningful near-term supply premium,” Gelber & Associates analysts wrote in a note.

US Treasury Secretary Scott Bessent told CNBC in an interview on Monday that the goal of US sanctions on Iran is “to create the conditions that they will want to come to the table” for negotiations.

Potentially easing supply concerns, Trump said on Sunday that oil secured under a deal with Venezuela would be used to replenish the US Strategic Petroleum Reserve, which has fallen to near its lowest level in 44 years.

US companies Chevron and GE Vernova, India’s ONGC, Italy’s Eni and Colombia’s GeoPark are on track to sign final agreements in Venezuela after months of negotiations to firm up energy projects in the Opec country, four sources close to the preparations said. REUTERS