Oil prices climb as US and Iran trade strikes

Oil prices are rising on fears of escalation in the Middle East after the first clashes between the US and Iran in over a month over the weekend.

Brent, the international benchmark, rose more than 1% on Tuesday to surpass $91 a barrel, extending the more than 2.5% gain from the previous session. The November Brent contract stood at $91.44 a barrel at 05:00 GMT, up from above $88 at Monday's close.

Fresh tensions flared after the US struck Iran's Larak Island and Iran attacked two US military bases in Jordan. In a television interview, US President Donald Trump vowed to retaliate for Tehran's attacks on the King Hussein and Al Azraq bases. He told Fox News: "We will hit them hard."

The UK Maritime Trade Operations Coordination Center, a monitoring unit run by the Royal Navy, reported on Monday evening that an oil tanker had been hit by three unidentified projectiles while transiting the Strait of Hormuz, where Iranian forces have previously launched attacks on commercial vessels. There were no casualties, and no country or group has claimed responsibility.

Oil prices have been volatile since the 60-day ceasefire between the US and Iran expired in mid-August, dashing hopes that shipping through the Strait of Hormuz would return to pre-war levels. The strait carries about one-fifth of global oil supply in peacetime.

After hitting a peak of nearly $94.40 a barrel on August 21, Brent has traded in the $86-91 range since the ceasefire ended without an extension or a permanent peace deal.

Saul Kavonic, head of energy research at MST Financial, told Al Jazeera: "Hopes for a short-term deal to reopen the strait have faded as the conflict appears to be returning to an escalatory trajectory after the recent attacks. The oil market increasingly realizes that we may be headed for a prolonged 'no war, no peace' situation, with only part of production flowing through the strait, possibly into 2027."

Traffic through the Strait of Hormuz, which was about 130 transits per day before the conflict, remains severely curtailed. Many vessels operate 'dark'—turning off their automatic identification systems to reduce the risk of being targeted by Iranian drones or missiles, or being intercepted by the US Navy. According to monitoring platform MarineTraffic, the strait saw 107 transits from August 24-30, down from 121 transits the previous week.

Tony Sycamore, senior market analyst at IG Markets, said oil prices could ease despite the fresh violence if 'dark' shipments pick up again. "After the latest clash and the risk of continued exchanges of fire, the path of least resistance for oil is up in the short term. However, if this flare-up settles by the weekend and ship-to-ship transfers resume, you could expect this week's geopolitical premium to be quickly stripped out. Overall, we are dealing with a day-by-day situation," he said.