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EMEA Oil Update: Crude Extends Rally Amid Escalating Persian Gulf Conflict

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Crude benchmarks extended gains on Monday, propelled by direct military strikes between US and Iranian forces in the Persian Gulf and mounting fears of prolonged disruptions in the Strait of Hormuz.

Brent crude futures gained over 1% to $97.31 per barrel, while Dubai 1st Line (Platts) energy futures were up 1.5% to $86.22/bbl.

Brent gained more than 7% on a weekly basis last week, supported by supply concerns stemming from geopolitical friction between the US and Iran.

"Crude extended last week's advance... after US attacks on Iranian tankers and Tehran's threat of a new restricted zone outside the Strait of Hormuz renewed concerns about prolonged supply disruptions," Saxo Bank analysts said.

US forces launched strikes on Saturday targeting three Iranian oil tankers including one off the coast of Kharg Island, Iran's primary export hub while the Islamic Revolutionary Guard Corps' navy claimed it targeted multiple commercial and US vessels operating in the region.

President Donald Trump warned that American forces control the Strait of Hormuz and may soon strike "Pickaxe Mountain," further dimming any prospects for an immediate diplomatic breakthrough.

Against this geopolitical backdrop, the OPEC+ sub-group led by Saudi Arabia and Russia agreed to keep October production quotas unchanged in line with their roadmap, with Saudi Arabia maintaining its output at 10.5 million barrels per day on Sunday.

Market analysts emphasize that the structural ability of global buffers to absorb ongoing supply shocks is rapidly eroding.

While weaker Chinese crude imports and coordinated inventory releases initially cushioned the market, OECD stockpiles have dropped sharply, the US Strategic Petroleum Reserve is nearing its effective operational limits, and product inventories remain near historically low levels.

"Elevated inventories helped absorb the initial supply crisis, but the challenge is now to keep the market balanced as those buffers diminish," ANZ analysts said.

Experts warn that demand destruction will increasingly become the primary mechanism for rebalancing the market, keeping oil prices heavily supported in the near term.

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