Oil prices jumped Monday after reports that Houthi rebels struck Saudi Aramco's Jazan refinery near the Yemen border, pushing WTI and Brent to their highest levels since July 23. The move comes alongside a second week of U.S.-Iran military exchanges and Iran's stated plan to tighten control over the Strait of Hormuz.
The West Texas Intermediate contract for October delivery advanced 1.3% to $92.70 a barrel on Monday, having briefly touched $93 earlier in the session, after reports emerged that a Saudi Aramco refinery had been hit by Houthi rebels.
Oil benchmarks hit seven-week highs
Brent crude's contract for November delivery rose to $97.31. The moves took both the U.S. benchmark and the international benchmark to their highest levels since July 23.
Refinery strike near the Yemen border
The Financial Times reported that Saudi Aramco's Jazan refinery was struck by Iran-backed Houthi rebels on Monday, with two people familiar with the situation telling the paper that the damage is currently being evaluated. The group has previously attacked the same infrastructure, most recently in August, which caused some delays to oil production.
Iran plans Hormuz "exclusion zone"
Mohsen Rezaei, the new secretary of Iran's Supreme National Security Council, said Sunday that Iran plans to unveil an exclusion zone barring ships from the Strait of Hormuz, the route through which 20% of global crude oil supplies previously flowed. He said the zone would be announced in the days ahead and would extend from the line of the U.S. naval blockade toward the strait and into the Persian Gulf, with violators facing sanctions.
Gulf conflict escalates as OPEC+ holds output steady
The U.S. and Iran continued to exchange military strikes, extending the renewed hostilities into a second week. On Sunday, Tehran claimed to have hit an unmanned U.S. military vessel in the Strait of Hormuz, but Centcom spokesperson Capt. Tim Hawkins dismissed the claim as a total lie. That followed Centcom's announcement that it struck three oil tankers on Saturday, including one near Kharg Island, which handles about 90% of Iran's oil exports.
Over the weekend, members of the Organization of the Petroleum Exporting Countries and allies agreed to keep oil production unchanged in October from September, after six consecutive months of output increases. According to Deutsche Bank's Jim Reid: "We remain a distance from a resolution."
The rise in oil prices also pushed U.S. stock-index futures down from early Monday highs, with Treasury futures easing on concerns that higher energy costs would bolster inflation pressures. Cash equity and bond markets in the U.S. were closed Monday for Labor Day.
Source: MarketWatch
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