Oil jumps more than 7pc to above $102 ahead of US blockade on Iran

LONDON (Reuters): Oil prices jumped back above $100 a barrel on Monday as the US Navy prepared to block ships to and from Iran via the Strait of Hormuz, a move that could restrict Iranian oil exports, after Washington and Tehran failed to reach a deal to end the war.

Brent crude futures gained $7.03, or 7.4%, to $102.23 a barrel by 0810 GMT after settling 0.75% lower on Friday.

US West Texas Intermediate was up $7.31, or 7.6%, at $103.88 a barrel following a 1.33% loss in the previous session.

President Donald Trump said on Sunday the US Navy would start blockading the Strait of Hormuz, raising the stakes after marathon talks with Iran failed to reach a deal to end the war and jeopardising a fragile two-week ceasefire.

He added that the price of oil and gasoline may remain high through November’s US midterm elections, a rare acknowledgement of the potential political fallout from his decision to attack Iran six weeks ago.

“The announced US blockade marks an admission that the ceasefire’s central premise - at least as interpreted by the US – which was the reopening of the Strait, is untenable for now,” Nordic bank SEB analyst Erik Meyersson said.

US Central Command said US forces would begin implementing the blockade of all maritime traffic entering and exiting Iranian ports at 10 a.m. ET (1400 GMT) on Monday.

It would be “enforced impartially against vessels of all nations entering or departing Iranian ports and coastal areas, including all Iranian ports on the Arabian Gulf and Gulf of Oman,” a CENTCOM statement on X said.

US forces would not impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports, it added.

Iran’s Revolutionary Guards said on Sunday that any military vessels attempting to approach the Strait of Hormuz would be considered a violation of the ceasefire and be dealt with harshly and decisively.

Prices for physical crude barrels are trading at significant premiums to futures, with some grades already at record highs of about $150 a barrel. “

President Trump does indeed back his blockade threat with actual boats, a convergence between the paper and physical markets may soon come,“ RBC Capital Markets analyst Helima Croft said.

Oil tankers are steering clear of the Strait of Hormuz ahead of the US blockade on Iran, shipping data on LSEG showed.

However, three supertankers fully laden with oil passed through the Strait of Hormuz on Saturday, shipping data showed.

They appeared to be the first vessels to exit the Gulf since the ceasefire deal was struck last week.

On Sunday, Saudi Arabia said it had restored full oil pumping capacity through the East-West pipeline to about 7 million barrels per day, days after providing an assessment of damage to its energy sector from attacks during the Iran conflict.