By Oluwakemi Kindness
Oil prices rose more than three per cent on Monday after the United States and Iran exchanged fresh strikes while negotiations to end the more-than-three-month-old Middle East war continued.
Brent crude, the benchmark for two-thirds of the world’s oil, climbed 3.33 per cent to $94.15 a barrel by 12:04pm UAE time.
West Texas Intermediate (WTI), the US benchmark, rose 3.74 per cent to $90.63 per barrel.
The gains followed a new round of military exchanges between Washington and Tehran.
Iran’s Islamic Revolutionary Guard Corps (IRGC) said its air force struck and destroyed an airbase it claimed was used by the United States to launch an attack on a telecommunications tower.
The group did not disclose the location of the airbase.
The statement was released around the same time Kuwaiti authorities reported that missiles and drones had been fired at their territory.
The latest developments came after the US military carried out strikes on two Iranian command-and-control sites in the Strait of Hormuz over the weekend.
According to US Central Command, the operation was launched in response to Iran shooting down a US drone operating over international waters.
Despite the renewed tensions, US Defence Secretary Pete Hegseth said there was still a possibility of reaching an agreement.
Speaking at the International Institute for Strategic Studies Shangri-La Dialogue, Hegseth said the United States was in a “good place” to secure a deal and described the talks as “productive”, although he did not provide details on the key sticking points.
Analysts, however, warned that oil flows may struggle to return to pre-war levels if the Strait of Hormuz remains under Iranian control.
“Washington could conceivably walk away and declare the war over, but that would probably leave the Strait of Hormuz under Iranian control,” said Helima Croft, Head of Global Commodity Markets at RBC Capital Markets.
She added that any arrangement that allows Iran to determine which ships can navigate the waterway could keep oil flows significantly below pre-war levels.
“As long as the IRG remains a sanctioned entity, we think Western companies will be wary of paying a toll to access the approved shipping lane, and the risk of renewed maritime attacks will potentially disincentivise an immediate return,” Croft said.
Oil markets have remained volatile throughout the conflict.
Last week, prices recorded their steepest weekly decline since early April amid optimism that the US and Iran could reach a peace agreement.
Brent crude futures settled 1.7 per cent lower at $91.12 a barrel, while WTI fell 1.73 per cent to $87.36 per barrel.
Goldman Sachs said oil prices face risks in both directions as concerns over supply disruptions compete with weakening demand.
The investment bank said there could be significant upside risks if supply losses in the Middle East persist, but also downside risks from weaker demand.
According to Goldman Sachs, weak oil demand in China and Europe poses a major downside risk to its fourth-quarter forecast of $90 per barrel for Brent crude and $83 per barrel for WTI.
The bank added that Brent prices could face downside pressure of as much as $10 per barrel if demand remains subdued.
