Global oil prices rose more than a dollar a barrel on Monday after United States forces struck an Iranian island in the Strait of Hormuz and Iran retaliated against American bases in Jordan, pushing the six-month Middle East war into a fresh escalation.
Brent crude futures climbed $1.08, or 1.23%, to $89.18 a barrel as at 0040 GMT, while US West Texas Intermediate was at $84.32, up 92 cents or 1.10%.
The strike and the response
A US official said American forces hit two Iranian launchers on Larak Island on Sunday — the first known US strikes on Iran since late July. “Islamic Revolutionary Guard Corps forces were observed preparing to launch rockets with sea mines into Strait of Hormuz,” the official said. Iran’s semi-official Tasnim news agency reported the attack was carried out by drone.
The Revolutionary Guards said the strike killed and wounded several soldiers and civilians and would draw “response and punishment” from Tehran. Iran then fired on US forces in Jordan. A US official told Al Jazeera that American forces intercepted the retaliation, describing the weapons as medium-range ballistic missiles and saying the attack “proves that Iran is no longer the power it once was.” A separate US source cited by Fox News said nearly all incoming missiles had been intercepted with no significant impact.
President Donald Trump said last week that all mines had been detonated or removed from international waters in the Strait of Hormuz, and that Iran had been told any vessel laying new mines would be destroyed. Sunday’s strike, aimed at minelaying capability, follows directly from that warning.
Why the market moved only modestly
Roughly a fifth of the world’s oil passed through the Strait of Hormuz before the war began at the end of February, and talks to reopen it remain deadlocked. Yet crude is still on course for a small monthly decline in August after falling more than 4% last week — its first weekly drop in three — because flows through the strait have been recovering, keeping supply fears contained, ANZ analysts said.
Shipping remains wary. The number of visible commodity vessels transiting Hormuz fell to five a day over the weekend, and the United Kingdom Maritime Trade Operations reported that a tanker was struck by a projectile while sailing inbound on Saturday.
“Looks like we are in another escalation phase. How long that lasts is impossible to determine. Could be days, could be weeks,” IG market analyst Tony Sycamore said. He put the next technical hurdle for WTI at $85.80 to $85.90 a barrel, above which last week’s $87.69 high and July’s $93.50 high would come into view.
The Sri Lankan angle
The war has already reached Sri Lankan waters. Iranian fuel tankers have been anchored off Galle since the blockade tightened, and the government said last week it was monitoring vessels sitting just outside the exclusive economic zone.
