Oil price hit 2-wk high as US-Iran tensions simmer after UAE drone strike
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Investing.com-- Oil prices rose sharply in Asian trade on Monday as tensions between the U.S. and Iran remained high, especially after a drone strike targeted a nuclear power plant in the United Arab Emirates.
U.S. President Donald Trump warned that the “clock is ticking” for Iran to accept a deal, as reports showed the U.S. and Israel actively discussing more military operations against Tehran.
Brent oil futures for July rose 1.8% to a two-week high of $111.20 a barrel by 23:45 ET (03:45 GMT), while West Texas Intermediate crude futures rose 2.2% to $103.21/barrel.
UAE nuclear plant hit with drone attacks
On Sunday, drone strikes caused a fire near the Barakah nuclear plant in the UAE, although no direct damage was done to the main plant.
The UAE blamed Iran or one of its proxies for the attack, calling it a "dangerous escalation."
Iran was seen launching drone and missile strikes on the UAE earlier this month, as military tensions flared in the Middle East, especially over the Strait of Hormuz.
Trump had warned last week that a U.S.-Iran ceasefire was on “massive life support,” as attempts at negotiating a peace deal largely fell flat.
The Strait of Hormuz remained closed after Iran effectively blocked the waterway in late-February. This kept oil shipments to Asia largely disrupted, underpinning crude prices.
A U.S.-China summit held last week yielded few new developments on Iran. Trump claimed that China had agreed to buy American oil, but it remained unclear whether a formal agreement had been signed.
Fears of oil supply disruptions remained a major concern, as Hormuz’s closure affected roughly 20% of the world’s oil supply. Shipping data showed traffic through the strait remained at a fraction of pre-war levels.
Adding to concerns over tighter oil markets, the U.S. let a sanctions waiver on Russian oil lapse over the weekend.
The waiver had previously allowed countries to buy Russian seaborne oil, but will now force major oil importers, especially India, to seek new sources of crude.
By Mohi Narayan and Florence Tan
NEW DELHI, May 18 (Reuters) - Oil prices extended gains on Monday as efforts to end the Iran war appeared to have stalled, after a nuclear power plant in the United Arab Emirates came under attack and as U.S. President Donald Trump is expected to discuss military options on Iran.
Brent crude futures climbed $2.01, or 1.84%, to $111.27 a barrel by 0432 GMT, but were off the $112 they had touched earlier for their highest since May 5.
U.S. West Texas Intermediate crude stood at $107.75 a barrel, up $2.33, or 2.21%, after a rise to $108.70, its highest since April 30. The front-month June contract expires on Tuesday.
Both contracts gained more than 7% last week as hopes dimmed for a peace deal to end ship attacks and seizures around the key waterway of the Strait of Hormuz.
Last week’s talks between Trump and Chinese President Xi Jinping ended without an indication from the world’s top oil importer that it would help resolve the conflict unleashed by the U.S.-Israeli attacks on Iran.
Drone attacks on the UAE and Saudi Arabia and rhetoric from the United States and Iran raised concerns of an escalation in the conflict.
"These drone strikes are a pointed warning - renewed U.S. or Israeli strikes on Iran could trigger more proxy attacks on Gulf energy and critical infrastructure by Iran or its regional proxies," IG market analyst Tony Sycamore said.
Emirati officials said they were investigating the source of the strike on the Barakah nuclear power plant, adding that the UAE had the full right to respond to such "terrorist attacks".
Saudi Arabia, which intercepted three drones that entered from Iraqi airspace, warned it would take the necessary operational measures to respond to any attempt to violate its sovereignty and security.
Trump is expected to meet top national security advisers on Tuesday to discuss options for military action regarding Iran, Axios reported.
In a move that could support oil prices, the Trump administration on Saturday allowed the lapse of a sanctions waiver that had previously allowed countries including India to buy Russian seaborne oil after a month-long extension.
"Fears of renewed strikes on Iran have worsened supply fears ... the United States letting the Russia sanctions waiver lapse didn’t help," said Vandana Hari, founder of oil market analysis provider Vanda Insights.
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