Oil jumps more than 1% after US attack on Iran's Larak Island - Sarmad

Oil prices jumped by more than $1 per barrel on Monday, after the United States launched an attack on an Iranian island in the Strait of Hormuz, prompting a response from Tehran, as the Middle East conflict entered its sixth month.

Brent crude futures rose $1.08, or 1.23 percent, to $89.18 per barrel by 00:40 GMT, while the U.S. West Texas Intermediate crude price reached $84.32 per barrel, up 92 cents, or 1.10 percent.

U.S. forces bombed launch platforms on Iran’s Larak Island in the Strait of Hormuz on Sunday, marking the first known U.S. airstrikes on Iranian territory since late July.

In response, Iranian state media reported on Monday that Iran had attacked two U.S. air bases in Jordan, citing the Islamic Revolutionary Guard Corps.

Tony Sycamore, market analyst at IG, said, “It appears we are in another phase of escalation. It is impossible to determine how long this will last. It could be days or it could be weeks.”

Sycamore noted that technical charts showed that if the conflict escalates and pushes West Texas Intermediate crude above the resistance level of $85.80 to $85.90 per barrel, it would pave the way for further gains, with prices initially reaching last week’s high of $87.69, and then moving toward July’s high of $93.50.

Negotiations aimed at ending the conflict are stalling, while mediators work to reopen the Strait of Hormuz, through which one-fifth of global oil supplies passed before the war broke out in late February.

Both Brent and West Texas Intermediate crude are expected to record slight declines in August following their drop of more than 4 percent last week, which marked their first weekly decline in three weeks.

In a client note, analysts at ANZ Bank said that while the path to an agreement to reopen the Strait of Hormuz remains unclear, increased oil flows through the strait have helped curb concerns about supply disruptions.

Shipping data on Monday showed that the number of cargo ships observed transiting the Strait of Hormuz at the beginning of the week fell to five per day, reflecting companies’ caution due to fears of attacks on vessels.

The UK Maritime Trade Operations agency reported on Sunday that an oil tanker was hit by a shell while transiting the strait on Saturday.

U.S. President Donald Trump said on Sunday that oil resulting from a recent agreement with Venezuela would be used to replenish the U.S. Strategic Petroleum Reserve, which has fallen to its lowest level in approximately 44 years.