Oil prices hold near six-week highs as US-Iran attacks hit Gulf shipping

Oil prices stayed near six-week highs on Monday, inching closer to $100 a barrel, as tit-for-tat strikes between the US and Iran on vessels in the Strait of Hormuz and other areas kept Middle East crude flows low.

Brent crude futures rose 89 cents, or 0.92 per cent, to $97.17 a barrel by 1333 GMT, after hitting $97.93, the highest since July 24. US West Texas Intermediate crude hovered near a recent six-week high at $92.27 a barrel, up 79 cents.

Attacks escalate in Gulf waters

US forces struck three Iranian oil tankers on Saturday, including one off Kharg Island, an oil export hub, according to US Central Command. Iran's Islamic Revolutionary Guard Corps said it targeted three oil tankers travelling through unauthorised routes in the Strait of Hormuz, as well as three US-linked vessels in other areas.

Maritime intelligence firm Marisks called the Saturday attacks a “major escalation.” “Commercial tankers are now being deliberately used as instruments of reciprocal economic pressure, substantially weakening the previous distinction between military confrontation and commercial shipping,” the firm added.

A week ago, a Saudi-owned tanker was attacked by Iran, with Saudi Arabia saying two seafarers had died. Oman said on Monday it had evacuated 16 crew members.

Supply risks and market response

Data from analytics firm Kpler showed an average of 10 commodity ships transited the Strait of Hormuz per day over the past 10 days, the lowest since May. “If tanker traffic begins to slow materially, the market could price in a much larger supply shock. And there are already signs that this is happening,” said Priyanka Sachdeva, head of market insights at Phillip Nova.

Goldman Sachs said oil prices may rally to as much as $120 a barrel if attacks on shipping rise. In Saudi Arabia, Saudi Aramco's Jazan oil refinery was attacked on Monday and damage is being ascertained, the Financial Times reported, citing two people with knowledge of the matter.

The secretary of Iran's Supreme National Security Council, Mohsen Rezaei, said a restricted zone will be announced outside the Strait of Hormuz in the coming days. Meanwhile, the United Arab Emirates is building alternative routes for its energy exports and trade to ensure they are not “held hostage” by the ongoing war between the US and Iran, said UAE presidential adviser Anwar Gargash on Monday.

OPEC+ holds output steady

OPEC+ kept its oil output policy unchanged for October at a meeting on Sunday, the producer group said in a statement, as it needs to agree on new quotas before deciding its next output steps.