Oil settles higher after Saudi strikes stoke supply worries

Oil prices surged more than 2% on Monday following additional Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Strait of Hormuz, heightening supply concerns following the shutdown of a critical Saudi oil pipeline. Brent crude futures surged $2.90, or 2.77%, to $107.51 per barrel, while West Texas Intermediate (WTI) futures climbed $2.27, or 2.27%, to $102.32 per barrel.

The price surge initially exceeded 3% at the market's opening bell. Saudi state media released video footage showing damage to homes and a mosque in Jazan province, attributed to a Houthi attack, while the Houthis also claimed responsibility for striking a Saudi military base in a neighboring province. A vessel in the Strait of Hormuz was hit by a projectile, causing a fire and prompting the crew's evacuation, according to the British maritime security agency UKMTO.

Iran reported one fatality and four injuries aboard an Iranian commercial vessel struck off its coast. Oil prices were anticipated to climb on Monday due to heightened concerns about supply risks from Saudi Arabia, the world's leading oil exporter. The country's East-West oil pipeline, which reroutes exports via the Strait of Hormuz, was shut down on Friday after a drone strike from Iraq, potentially affecting up to 4% of global oil supply.

Meanwhile, Yemen's Houthi rebels advanced to the strategic island of Perim, consolidating control over the Bab el-Mandeb Strait, a crucial oil transit lane contributing 4-5% of global supply. Oil prices increased by 8% over the week, surging above $100 for the first time since July. Analyst Tony Sycamore from IG noted that unless the ongoing talks in Oman yield operational results or the East-West pipeline is promptly restored, crude oil may continue its upward trajectory toward the $119.48 high reached in early March.

Despite the ongoing conflict, Omani Foreign Minister Badr Albusaidi announced a rescheduled Monday meeting in Oman involving Gulf countries and Iran to discuss the Strait of Hormuz, as reported by X. Since the war's inception six months ago, initiated by the United States and Israel, peace negotiations have not taken place since an interim agreement in June fell apart after just a few weeks.