Oil prices climbed to their highest levels in two weeks on Monday after a drone attack targeted a nuclear power facility in the United Arab Emirates, raising fears of a wider escalation in the Iran conflict and fresh disruption to global energy supplies.
Brent crude rose more than 1.5 per cent to above $110 a barrel, while US West Texas Intermediate crude gained nearly 2 per cent as investors reacted to mounting geopolitical tensions across the Middle East.
The gains came amid signs that diplomatic efforts to ease the Iran war had stalled, with the United States reportedly considering further military options against Tehran.
Drone attacks targeting the UAE and Saudi Arabia over the weekend intensified concerns that the conflict could spread across the Gulf region and threaten critical oil infrastructure.
“These drone strikes are a pointed warning – renewed US 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.
Officials in the UAE said investigations were ongoing into the strike on the Barakah nuclear power plant, while Saudi Arabia confirmed intercepting three drones that crossed into its airspace from Iraq.
Saudi authorities warned they would take “necessary operational measures” to defend the country’s sovereignty and security.
Oil markets have remained volatile since attacks and seizures involving vessels around the Strait of Hormuz disrupted one of the world’s most important shipping routes for crude exports.
Both Brent and WTI crude gained more than 7 per cent last week as hopes for a ceasefire between Iran and its adversaries weakened.
Last week’s discussions between US President Donald Trump and Chinese President Xi Jinping ended without any major breakthrough on resolving the crisis.
Reports by Axios also said Trump was expected to meet senior national security advisers on Tuesday to discuss possible military action relating to Iran.
Analysts said the latest developments have heightened fears over global oil supply disruptions, especially as the United States also allowed a sanctions waiver permitting some countries to purchase Russian seaborne oil to expire.
“Fears of renewed strikes on Iran have worsened supply fears the United States letting the Russia sanctions waiver lapse didn’t help,” founder of Vanda Insights, Vandana Hari, said.
Erizia Rubyjeana
