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Oil Rises Off a Six-Week Low on Renewed Strikes Between the United States and Iran

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Oil prices rose early on Monday, climbing off a six-week low as Iran and the United States traded attacks, dimming expectations for a peace deal in a war now entering its fourth month that has caused the largest-ever oil supply shock.

West Texas Intermediate crude oil for July delivery was last seen up US$3.09 to US$90.45 per barrel after falling to the lowest since April 17 on Friday, while August Brent oil was up US$2.62 to US$93.74.

The rise comes after the United States over the weekend attacked Iranian military sites, while The Guardian reported Iran on Monday targeted a U.S. military base in Kuwait.

The hostilities have dimmed prospects for a end to the war that began on Feb. 28, when the United States and Israel launched strike on Iran, which responded by blockading the Strait of Hormuz, the narrow waterway that is the chokepoint for 20% of daily oil demand supplied by Persian Gulf countries.

The price of the commodity rose well above US$100 per barrel in April as the war blocked exports from the Gulf, but have since moderated on hopes talks between the two countries hosted by Qatar will produce a deal that reopens the Strait, while some of the region's exporters have found alternatives to tanker shipments and demand has weakened due to high prices.

"Traders continue to price in the likelihood that any agreement could trigger a near-term surge in supply from vessels currently stranded inside the Persian Gulf. By now, it is also clear that several key release valves have helped prevent an even larger price spike. These include a sharp increase in US oil exports, a slump in Chinese crude imports, the use of UAE and Saudi Arabian pipeline infrastructure that bypasses the Strait of Hormuz, strategic petroleum reserve releases, and weaker end-user demand through a combination of demand destruction and use of domestic stockpiles," Saxo Bank noted.

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