Oil prices extended their gains on Tuesday as traders reacted to reports of fresh Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf. Ongoing tensions between Iran and the U.S. added to supply concerns in an already tight energy market.
November Brent crude futures, the international benchmark, rose 1.25% to $107.00 a barrel. October U.S. West Texas Intermediate futures gained 1.27% to $102.68 per barrel.
Saudi Arabia shut its key East-West pipeline, which bypasses the Strait of Hormuz, after drones launched from Iraq damaged the route. The closure worsened supply disruption risks at a time when the market was already under pressure.
Al Jazeera reported that the Saudi-led coalition in Yemen said 13 civilians were injured on Monday after Houthi forces launched a wave of ballistic missile and drone attacks into Saudi Arabia.
At the same time, Iran’s military said it destroyed an advanced American drone over the Strait of Hormuz, following a series of operations by Tehran against U.S. unmanned naval systems in the Gulf. U.S. President Donald Trump said on Sunday that the U.S. could continue its campaign against Iran and take control of its oil.
U.S. Central Command also challenged a claim by Iran’s Islamic Revolutionary Guard Corps that the Panama-flagged oil tanker El Gaia hit a naval mine in the Strait of Hormuz. According to CENTCOM, El Gaia was struck by an Iranian missile last month and left inoperable. The command said the IRGC’s version was false and part of an effort to intimidate commercial shipping in the strait.
Komal Sri-Kumar, president of Sri-Kumar Global Strategies, told CNBC’s Squawk Box Asia that inflation is likely to pick up because oil pipelines are under attack and the Saudi east west pipeline is closed. He added that an accelerating tariff war is also likely to push prices higher and lift bond yields.
