DTN Oil Update
Oil Up 3% as Hostilities Return to Hormuz
SECAUCUS, N.J. (DTN) -- Crude futures surged 3% Monday morning after U.S. forces struck an Iranian island in the Strait of Hormuz, marking the first exchange of fire between Washington and Tehran in over a month following the end of a ceasefire.
By 8:45 a.m. EDT, NYMEX WTI crude for October delivery rose $2.61, or 3.13%, to $86.01 bbl. With markets into their final session for August, the U.S. crude benchmark was up 1.6% on the month.
ICE Brent for November delivery advanced $4.58, or 5%, to $90.70 gallon. The global crude benchmark gained 3% on the month.
Downstream, NYMEX ULSD for October delivery climbed $0.1150, or 2.76%, to $4.3640 gallon. NYMEX RBOB for September retreated $0.0238, or 0.43%, to $3.4661 gallon.
The U.S. Dollar Index slid 0.148 points to 99.510 against a basket of currencies.
Market volatility was amplified by thin trading volumes linked to a U.K. public holiday.
Crude futures rallied after U.S. forces struck two missile launchers on Iran's Larak Island on Sunday, Aug. 30. Iran's Revolutionary Guards reported Monday they responded by attacking two U.S. air bases in Jordan, reviving fears of widespread supply disruptions.
U.S. President Donald Trump added to the geopolitical noise Sunday with a social media post claiming Iran's Kharg Island energy hub was destroyed. Iranian officials quickly denied the Kharg Island claim and confirmed that crude oil operations were continuing.
However, the renewed hostilities effectively stalled recent diplomatic efforts aimed at establishing a joint shipping lane through the strategic chokepoint. Shipping data over the weekend showed visible commodity vessels transiting the strait fell to just five a day. Supply risks escalated after the United Kingdom Maritime Trade Operations agency reported a tanker was struck by a projectile entering the strait Saturday.
On the economic front, Treasury Secretary Scott Bessent warned Sunday that Washington was likely to impose secondary sanctions on Iran on a weekly basis. Despite Monday's rally, Brent and WTI crude remain on track for modest August declines following last week's sharp drop.
On another front, Trump announced plans at the weekend to use reserve oil secured under a deal with Venezuela to replenish the U.S. Strategic Petroleum Reserve, although experts said it would take years and tens of billions of dollars for such an initiative to materialize. U.S. emergency stockpiles have fallen to near their lowest level in 44 years following extensive drawdowns.