Oil jumped more than 9 per cent on Monday after the US launched waves of attacks on Iran, and Tehran said it had closed the Strait of Hormuz again.
Brent, the benchmark for two thirds of the world’s oil, rose $7.29, or 9.59 per cent, to $83.30, while West Texas Intermediate crude settled up $6.73, or 9.42 per cent, to $78.14 a barrel.
"Recent attacks highlight how uncertain Gulf exports remain and a serious re-escalation could reintensify the short-run upside risk to oil prices," Goldman Sachs said in a note.
The US is also set to reinstate the naval blockade on July 14 at 8pm GMT, according to the Joint Maritime Information Centre.
The International Energy Agency flagged a potential supply risk in its latest monthly market report. Global supply rebounded by 4.1 million barrels per day in June to 98.8 million bpd as traffic through the Strait of Hormuz partially recovered, the Paris-based agency said. Global oil output remained 9.4 million bpd below the levels recorded before the war began in February.
"Renewed exchanges of fire in the Gulf this week highlight the risks of not reaching a lasting peace agreement, which is a must for the normalisation in oil markets," the agency said.
The effects of the latest escalation are also being felt in gas markets, Eric Yep, Asia energy news editor at S&P Global Commodity Insights, wrote in a note on Monday. About a fifth of the world's liquefied natural gas (LNG) supply transits through the strait, almost all of it from Qatar. The country's Al Rekayyat LNG carrier was struck on July 7, prompting the first round of attacks last week.
The steady escalation and conflicting claims over shipping in the strait "will continue to be bullish for Platts JKM, NWE LNG and gas hub prices, especially if strikes start to target broader oil and gas infrastructure in the region", he added. Platts JKM is S&P Global's Asian LNG benchmark, NWE LNG refers to spot cargoes delivered to north-west Europe and gas hub prices are wholesale spot prices at hubs such as the Dutch TTF.
Market participants are "increasingly unsure about Middle East flows returning to the market imminently". This uncertainty is likely to translate into intense spot procurement as heatwaves and stockpiling demand put pressure on Asian and European importers.
US Central Command said late on Sunday that the strait was a "vital maritime corridor for global trade" and that Iran "does not control it". Centcom said commercial transits continue and that more than 800 vessels and 400 million barrels of crude had moved through the waterway since May, including more than 140 ships in the past week.
The renewed strikes came a day after Centcom said it completed a further round of US attacks on Iran, hitting about 140 targets and bringing the tally for the past week to more than 300. Early on Monday, US forces launched a further wave of strikes, hitting "dozens" more targets and using one-way attack drones at sea for the first time, Centcom said.
Iran retaliated with drone and missile attacks on US-linked sites in Bahrain, Kuwait and Jordan, and Iran's so-called authority in the strait said passage through the waterway was "not possible". Qatar's Foreign Ministry condemned what it called a "dangerous escalation".
