Oil extends gains after US and Iran strike ships

Oil prices surged on Monday following tit-for-tat attacks between the United States and Iran on vessels navigating the Strait of Hormuz and other regions, raising doubts about a prolonged supply disruption from the Middle East. Brent crude futures rose 52 cents, or 0.54%, to $96.80 a barrel, while U.S. West Texas Intermediate crude increased 66 cents, or 0.72%, to $92.14 a barrel.

Brent prices climbed 7.8% last week, and WTI gained nearly 10% after the U.S. and Iran resumed attacks, causing a reduction in oil flow through the Hormuz Strait, which typically transports a fifth of the world's oil supply.

U.S. forces targeted three Iranian oil tankers on Saturday, including one near Kharg Island, a key Iranian oil export hub. The Iranian navy claimed to have struck three oil tankers traveling through unauthorized routes in the Strait of Hormuz and three additional U.S. vessels in other areas. According to maritime intelligence firm Marisks, the Saturday attacks marked a "major escalation in the maritime conflict," signaling that commercial tankers are now intentionally utilized as tools of reciprocal economic pressure, blurring the line between military confrontation and commercial shipping.

On average, 10 commodity ships transited the Strait of Hormuz daily over the past 10 days, the lowest level since May, according to data from analytics firm Kpler. Iran's Supreme National Security Council Secretary, Mohsen Rezaei, announced the establishment of a restricted zone outside the Strait of Hormuz in coming days, as reported by state media. OPEC+ maintained its oil output policy unchanged for October during a meeting on Sunday, as the group needs to agree on new quotas before deciding its next output steps.

A prolonged standoff, characterized by calculated military actions by the U.S. and Iran, appeared to be the most probable scenario, potentially delaying the full recovery of Middle East supply. ANZ analysts stated in a note that a prolonged standoff is likely, and exports will remain constrained through the rest of 2026. They expect a gradual reopening late in Q4 2026, but a return to pre-war throughput is not anticipated until late first quarter or early second quarter of 2027.