Oil prices jumped around 2% on Monday as geopolitical tensions continued to keep pressure on global energy markets.
Brent crude futures rose roughly 2% to $106.73 at the time of writing, while West Texas Intermediate (WTI) crude futures climbed close to 2% to $93.72.
The gains came despite hopes of de-escalation between the United States and Iran after President Donald Trump said last week that his administration had no plans to attack Iran before the November 3 midterm elections.
However, fresh attacks in the region and continued disruption risks have kept traders focused on the possibility of further supply constraints.
Developments in the Russia-Ukraine conflict have added another source of uncertainty for the oil market.
Middle East escalation back on the cards?
Trump’s remarks last week had helped oil prices cool somewhat as hopes of de-escalation in the Middle East increased.
However, the security situation in the region remains volatile.
Yemen’s Houthi militant group launched an attack on King Khalid International Airport in Saudi Arabia’s capital, Riyadh, on Saturday.
The strike left 12 people dead and more than 300 injured.
The airport remains shut as Saudi Arabia deals with another round of missile attacks by the group.
The Saudi government said Monday that it was facing a fresh escalation from the Iran-backed Houthis, whose recent advances in Yemen have helped them gain control of a key chokepoint near Bab el-Mandeb.
Fears that further disruptions could restrict the flow of oil have added to the upward pressure on prices.
The risk that attacks could escalate into a wider regional conflict, affecting oil production and transportation, is another concern for traders.
According to the UK Maritime Trade Operations, a tanker was struck by a drone near the Sohar anchorage in Oman over the weekend, while another vessel was damaged by an unknown projectile while transiting the Strait of Hormuz.
Tanker attacks around the strait had already reached their highest weekly level since the Iran war began.
The possibility of further attacks along critical shipping routes has kept a geopolitical risk premium in oil prices, as traders remain concerned about whether supplies can continue flowing without interruption.
The Russian factor
The Russia-Ukraine conflict is adding another layer of uncertainty to the outlook for energy supplies.
Trump had announced an “energy ceasefire” between Russia and Ukraine, raising hopes that a reduction in attacks on energy infrastructure could ease pressure on supplies.
However, the arrangement appears to be facing difficulties.
Ukrainian President Volodymyr Zelenskyy said Monday that Moscow continued attacking Ukrainian energy facilities despite the ceasefire.
According to Zelenskyy, Russian strikes hit a power plant in Kharkiv, a gas production facility and a civilian gas station.
Meanwhile, The Guardian reported that Russia had rejected the “energy ceasefire,” casting further doubt on the prospects for a reduction in attacks on energy infrastructure.
A lasting reduction in hostilities between the two countries could support oil prices moving lower by improving the outlook for Russian supplies returning to the market.
Continued attacks, however, risk prolonging uncertainty around energy production and exports.
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