Oil Jumps as US-Iran Clash Escalates; Brent Tops $91

Oil prices surged after military clashes between the US and Iran intensified over the weekend, stoking fears of disruptions to crude flows through the Strait of Hormuz.

Brent crude, the international benchmark, rose more than 3% to trade around $91 a barrel on July 19, the highest since mid-June, according to Bloomberg. West Texas Intermediate climbed to about $85 a barrel.

Iran said its de facto ceasefire with the US had effectively collapsed, raising the prospect of prolonged disruptions to energy shipments through the Strait of Hormuz.

Iran's navy said it blocked four unidentified vessels on July 18 that had attempted to use what it described as an unsafe route in the Strait of Hormuz. Iran said two of the ships ignored warnings and were later involved in accidents that halted their voyages, while the other two abandoned the route and turned back.

The US and Iran have traded retaliatory strikes over the past week, with targets expanding from military facilities to bridges, infrastructure and ports. Kuwait Petroleum Corp., Kuwait's state-owned oil company, said on July 18 that Iranian attacks had caused extensive damage to oil facilities in the country.

Saul Kavonic, a senior energy analyst at MST Marquee, said the weekend escalation showed the conflict could broaden and become more protracted. He added that oil prices could rise more sharply if regional energy infrastructure comes under direct attack or if Yemen's Houthi militants disrupt shipping routes in the Red Sea.

The US has resumed blockade measures in the Strait of Hormuz. Iranian attacks on ships are also disrupting so-called shuttle transfers, in which Persian Gulf producers move crude to vessels outside the strait.

US Energy Secretary Chris Wright said the number of ships passing through the Strait of Hormuz has declined, although large tankers have recently continued to transit the waterway.