Oil prices rose by more than 2% during trading on Monday, after the United States and Iran exchanged new military strikes, while Israel ordered its forces to penetrate deeper into Lebanese territory as part of the confrontation with the Tehran-backed Hezbollah.
U.S. crude futures rose by $2.29, or 2.62%, to $89.65 a barrel.
Brent crude futures also rose by $2.05, or 2.25%, to $93.17 a barrel.
This rise came after renewed military confrontations, just days after the United States hosted peace talks between Israel and Lebanon in Washington on Friday, which reduced market hopes for a quick agreement to extend the ceasefire between Washington and Tehran, expectations that had pushed US crude and Brent down by about 1.7% and 1.8% respectively at the end of trading on Friday.
The exchange of blows complicates the chances of de-escalation.
The United States announced on Sunday that it had carried out what it described as defensive strikes against radar sites and drone control facilities within the Iranian regions of Goruk and Qeshm Island over the weekend.
Washington said the operations were in response to what it described as hostile activities emanating from Tehran.
In response, the Iranian Revolutionary Guard announced that its Aerospace Force had targeted an airbase used in the US attack on a communications tower located on Iran's Sirik Island.
US President Donald Trump said on Friday that he would soon decide on a proposal to extend the ceasefire agreement announced in early April, giving negotiators more time to reach a permanent settlement to the conflict and address disagreements over Iran’s nuclear program.
However, the path to an agreement remains complicated, as Israel is a key party to any potential settlement, while Iran has repeatedly stressed the need to involve Hezbollah in any future arrangements.
The Strait of Hormuz is back in danger.
A US official revealed on Sunday that Washington has proposed a plan for gradual de-escalation, based on Hezbollah halting its attacks against Israel in exchange for Israel refraining from escalating its military operations inside Beirut.
But concerns about the Strait of Hormuz continue to grow, according to Tony Sycamore, a market analyst at IG, who noted that the presence of sea mines in the strategic waterway could slow its full reopening even if a political agreement is reached.
He explained that this means any breakthrough in the oil markets may take longer than expected, even after shipping resumes.
Sycamore added that reaching an agreement would not necessarily lead to an immediate influx of huge quantities of oil into global markets.
In the same context, a journalist from Axios reported via the X platform on Friday that Iran had planted more mines in the Strait during the past week, shortly after US Defense Secretary Pete Hegseth warned that any further attempts to plant mines would be considered a violation of the ceasefire agreement.
Supply concerns outweigh weakness in the Chinese economy.
The Strait of Hormuz is one of the world's most important energy arteries, with about 20% of global oil and gas flows passing through it. Reports indicate that Iran has effectively disrupted normal traffic through it since the outbreak of the military confrontation resulting from the US and Israeli strikes last February.
Despite weak economic data from China over the weekend showing a slowdown in industrial activity, concerns about supply shortages overshadowed the negative impact of this data.
The figures showed that the Chinese economy, the world's second largest, is facing increasing challenges as a result of declining exports and continued cost pressures, raising concerns about a loss of economic momentum in the coming period.
In this context, Goldman Sachs warned that weak oil demand in China and Europe poses a significant risk to its crude price forecasts for the fourth quarter of the year.
The bank noted that this weakness could push Brent crude prices below its target of $90 a barrel, and West Texas Intermediate crude to below $83 a barrel, but it stressed at the same time that any further disruptions to Middle East supplies could push prices to significantly higher levels.
