DUBAI: Oil prices jumped on Monday as escalating tensions in the Gulf raised fears of supply disruptions, following a drone strike on a United Arab Emirates energy facility and the deployment of US warships to the Strait of Hormuz.
Brent crude futures rose more than 5 percent, while US West Texas Intermediate (WTI) crude also gained, as markets reacted to the growing risk to one of the world’s most critical energy corridors.
Near 1535 GMT (8:35 pm PKT), Brent oil futures have jumped 5.2pc to $113.78 a barrel, while US benchmark West Texas Intermediate rose 3.1pc to $105.11 a barrel.
Authorities in the UAE said a drone strike caused a fire at an energy installation in the emirate of Fujairah, a key hub for oil storage and exports.
The UAE defence ministry later said Iranian missile and drone attacks were targeting the country.
Earlier, Abu Dhabi accused Iran of launching drones at a tanker affiliated with the Abu Dhabi National Oil Company as it transited the strait.
The United Kingdom Maritime Trade Operations (UKMTO) also reported an incident involving a cargo vessel north of Dubai.
US naval deployment to Hormuz
The United States military said guided-missile destroyers had entered the Gulf to escort commercial shipping under a mission announced by President Donald Trump.
US Central Command said the warships had transited the Strait of Hormuz in support of the operation and that two US-flagged merchant vessels had already passed safely through the waterway.
Iranian state television said its navy fired a cruise missile as a “warning shot” in Strait of Hormuz.
Around 20 percent of global oil and liquefied natural gas supplies typically pass through the strait.
“The path for prices remains skewed to the upside as long as flows through the strait remain restricted,” UBS analyst Giovanni Staunovo said.
Markets react to renewed tensions
The surge in oil prices weighed on equity markets.
The tech-heavy Nasdaq, which had hit record highs last week, retreated into negative territory as energy costs surged.
However, Asian markets rallied earlier in the day, with Seoul rising more than 5 percent and Taipei gaining over 4 percent to reach record levels.
Chipmakers led the gains, with SK hynix jumping 12.5 percent and Samsung rising more than 5 percent, while Taiwan’s TSMC climbed 6.6 percent.
In Europe, Paris and Frankfurt both closed more than one percent lower.
Tokyo, Shanghai and London markets were shut for public holidays.
Investors have also been focused on strong corporate earnings, particularly in the technology sector, which have revived interest in artificial intelligence-driven stocks.
The tensions come amid a ceasefire between the US and Iran, which was extended indefinitely after initially being brokered for two weeks.
The conflict has already disrupted shipping through the Strait of Hormuz, with Washington maintaining a blockade on Iranian ports and Tehran responding with measures affecting maritime traffic.
