Brent crude jumped 3.5% to more than $108 a barrel as trading opened in Asia on Monday, after Gulf states postponed a planned meeting with Iran over the Strait of Hormuz. The delay lands alongside Saudi Arabia's closure of its east-west pipeline following a drone attack, deepening the standoff over the waterway that once carried a fifth of the world's oil and gas.
Oil prices jumped on Monday after Gulf states postponed a crunch meeting with Iran on the Strait of Hormuz, citing a lack of consensus. Brent crude, the international benchmark, rose 3.5% to more than $108 a barrel as trading opened in Asia, before later changing hands at $107.40.
Talks postponed as consensus breaks down
Iranian and Arab foreign ministers had been set to meet in Oman to discuss a deal between Tehran and Muscat to temporarily manage shipping through Hormuz. Oman's foreign minister, Badr Albusaidi, postponed the meeting for what he called "the interests of consensus", without elaborating.
The gathering would have marked the first time top diplomats from all six Gulf Cooperation Council members — Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain — sat down as a group with their Iranian counterpart in almost two years. Bahrain, which holds the rotating GCC presidency and has been among the states hardest hit by Iran's retaliatory attacks, said on Saturday it would not take part.
Saudi pipeline shut after drone attack
The postponement comes as Saudi Arabia, the world's top oil exporter, faces a brewing crisis of its own. A drone attack on Thursday, launched from Iraq where Iran-backed Shia militias are active, forced Riyadh to close its pipeline running from the kingdom's oil-rich east to its west coast. Satellite images showed heavy damage to a pumping station, and it remained unclear how long repairs would take.
Iran-backed Houthi rebels in Yemen also launched missiles and drones at Saudi energy infrastructure in the kingdom's south last week, part of renewed fighting in Yemen's civil war. Those attacks pushed prices past $100 a barrel last week to their highest level since May.
Brent extends its run as yields climb
The rally has been building for over a week: Brent traded at $106.83 a barrel on Thursday, up 5.6% on the day and its highest level since May 19, having risen 11.7% since Sept. 2. European government bonds weakened on inflation worries as a result, with the yield on French 10-year bonds rising 0.04 percentage points to 4.49%, its highest level since 2008.
Diplomats have cautioned that a full reopening of the strait still requires a separate deal between the US and Iran. Washington has told mediators it will not return to the ceasefire memorandum signed with Tehran in June and will only accept a broader agreement that also covers Iran's nuclear programme.
Sources: Financial Times, The Defiant
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