Brent crude futures rose $1.88 or 2.44% at $78.89 a barrel as of 1122 GMT. U.S. West Texas Intermediate crude advanced $1.87 or 2.53% at $75.71.
Both contracts jumped by more than 3% earlier in the session to $81.40 and $78.40, respectively, five-month highs, before giving up some gains.
The rise in prices came after U.S. President Donald Trump said he had “obliterated” Iran’s main nuclear sites in strikes over the weekend, joining an Israeli assault in an escalation of conflict in the Middle East as Tehran vowed to defend itself.
Iran is OPEC’s third-largest crude producer.
Market participants expect further price gains amid mounting fears that an Iranian retaliation may include a closure of the Strait of Hormuz, through which roughly a fifth of global crude supply flows. Iran’s Press TV reported that the Iranian parliament approved a measure to close the strait. Iran has in the past threatened to close the strait but has never followed through on the move. “The risks of damage to oil infrastructure … have multiplied,” said Sparta Commodities senior analyst June Goh.
Although there are alternative pipeline routes out of the region, there will still be crude volumes that cannot be fully exported out if the Strait of Hormuz becomes inaccessible. Shippers will increasingly stay out of the region, she added.
Brent has risen 13% since the conflict began on June 13, while WTI has gained around 10%.
The current geopolitical risk premium is unlikely to last without tangible supply disruptions, analysts said.
Meanwhile, the unwinding of some of the long positions accumulated following a recent price rally could cap an upside to oil prices, Ole Hansen, head of commodity strategy at Saxo Bank, wrote in a market commentary on Sunday. (Reporting by Siyi Liu in Singapore; Editing by Himani Sarkar)
