Oil jumps more than 7% to above US$102 ahead of U.S. blockade on Iran

A person pumps gas at a gas station in Mississauga, Ont. THE CANADIAN PRESS/Christopher Katsarov

Oil prices jumped back above US$100 a barrel on Monday as the U.S. Navy prepared to block ships to and from Iran via the Strait of Hormuz in ‌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 $6.81, or 7.2 per cent, to $102.01 a barrel by 1129 GMT after settling 0.75 per cent down on Friday. U.S. West Texas Intermediate was ​up $7.50, or 7.8 per cent, at $104.07 after a 1.33 per cent loss in the previous session.

U.S. President Donald Trump said on Sunday that the U.S. 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, jeopardizing a fragile two-week ceasefire.

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

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

U.S. Central Command said that U.S. 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”, CENTCOM said in a statement on X.

U.S. 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 in 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.

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

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

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However, three supertankers fully laden with oil passed through the strait 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 after damage to ​its energy sector from attacks during the Iran conflict.

(Additional reporting by Florence Tan and Jeslyn Lerh in ​Singapore; Editing by Kevin Buckland, Kirsten Donovan and David Goodman)