Oil prices continued to rise following US and Iranian attacks on ships serving their respective purposes
US forces attacked three Iranian oil tankers on Saturday. The Iranian Revolutionary Guard (IRGC) announced it targeted six ships on Saturday in retaliation. Saturday's attacks represent a major escalation in naval conflict.
Iran decided to declare a restricted zone outside the Strait of Hormuz. Traffic in the Strait of Hormuz fell to its lowest level since May.
Oil prices rose more than $1 a barrel on Monday as mutual attacks between the US and Iran on ships sailing in the Strait of Hormuz and other regions heightened concerns about a prolonged supply disruption from the Middle East.
Brent crude futures rose $1.20, or 1.25%, to $97.48 a barrel as of 07:27 GMT, while WTI crude rose 1.14 cents, or 1.25%, to $92.62 a barrel.
Brent crude rose 7.8% last week, while WTI crude gained 10% following renewed US and Iranian attacks.
Commercial tankers are now being deliberately used as tools of reciprocal economic pressure, significantly weakening the previous distinction between military conflict and commercial shipping.
In the last 10 days, an average of 10 commodity ships have passed through the Strait of Hormuz daily; this is the lowest level since May.
If tanker traffic begins to slow significantly, the market could price in a much larger supply shock. And there are signs that this is already happening.
Iranian Supreme National Security Council Secretary Mohsen Rezaei said on Sunday, according to state media, that a restricted zone outside the Strait of Hormuz will be declared in the coming days.
OPEC+ did not change its oil production policy for October at its meeting on Sunday. The producer group stated that it needs to agree on new quotas before deciding on the next production steps.
A prolonged stalemate, interrupted by gradual military interventions by the US and Iran, is the most likely scenario and is likely to delay the full recovery of Middle East supply.
Analysts expect exports to remain restricted for the remainder of 2026 under current conditions, gradually reopening in the late fourth quarter of 2026, and a return to pre-war production levels is not expected until late first or early second quarter of 2027.
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