Oil prices surged more than 3% on Monday following Iran's claim that its forces struck a U.S. warship attempting to enter the Strait of Hormuz, forcing it to turn back. The United States denied that any of its vessels were hit, but the incident heightened tensions in the strategic waterway.
Price Movements
Brent crude futures rose $3.64, or 3.4%, to $111.81 per barrel by 1124 GMT, recovering from a $2.23 decline on Friday. U.S. West Texas Intermediate (WTI) crude climbed $3.40, or 3.3%, to $105.34 per barrel, after losing $3.13 in the previous session.
Iran's Claim and US Denial
Iran's semi-official Fars news agency reported, citing local sources, that Iranian forces struck a U.S. warship that intended to pass through the Strait of Hormuz, forcing it to turn back. However, U.S. Central Command denied that any U.S. Navy ships had been struck on Monday, stating that all vessels were operating normally.
Prices were already trading higher due to ongoing disruptions to oil supplies through the strait. UBS analyst Giovanni Staunovo noted that the path for prices remains skewed to the upside as long as flows through the Strait remain restricted.
Market Context
President Donald Trump said the U.S. would begin efforts to assist ships stranded in the Strait of Hormuz, but prices stayed above $100 per barrel, with no peace deal in sight and shipping through the waterway still constrained. Iran's military warned U.S. forces not to enter the strait, threatening a harsh response to any threat.
Trump has made securing a nuclear deal with Tehran a priority, but Iran wants to defer nuclear talks until after the war and first lift rival blockades on Gulf shipping.
Incident Near Fujairah
The United Kingdom Maritime Trade Operations agency reported on Monday that a tanker had been hit by unknown projectiles while transiting near Fujairah in the United Arab Emirates, adding to regional tensions.
OPEC+ Output Decision
On Sunday, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, said it would raise oil output targets by 188,000 barrels per day in June for seven members, marking the third consecutive monthly increase. The rise matches that agreed for May, minus the share of the United Arab Emirates, which left OPEC on May 1. However, the additional barrels are expected to remain largely on paper as long as the Iran war continues to disrupt Gulf oil supplies through the Strait of Hormuz.
