International oil prices climbed by more than $3 per barrel on Monday, triggered by reports of explosions across Iran and renewed Israeli military action in Lebanon.
Brent crude futures rose by 3.39 per cent to reach $96.24 a barrel by 03:33 GMT, while US crude futures increased by 3.17 per cent to settle at $93.41 per barrel, reports Reuters.
Market volatility
These gains effectively cancelled out losses from Friday, when markets had briefly dipped on expectations of a diplomatic de-escalation between the United States and Iran.
Since March, the ongoing regional conflict has driven oil prices up by more than 50 per cent.
The latest volatility follows reports from local media of blasts heard in Isfahan, Tabriz, and Tehran early on Monday. These reports have diminished prospects for a swift conclusion to the wider war and the subsequent reopening of Strait of Hormuz to crude flows.
Diplomatic efforts and retaliations
The explosions occurred shortly after Israel resumed strikes on Lebanon on Sunday, which prompted Iran to launch a retaliatory missile salvo against Israeli targets.
Despite the intensifying violence, US President Donald Trump maintained that a broader peace agreement remains “well within reach”.
Trump has reportedly advised Israeli Prime Minister Benjamin Netanyahu to refrain from further military strikes. In an interview with Financial Times, US President asserted his authority over the negotiation process, stating “It’s not going to have any impact on the deal. I call the shots. I call all the shots. He doesn’t call the shots”.
Ceasefire conditions and blockades
A primary hurdle for a peace deal with Washington remains Tehran’s demand for a ceasefire in Lebanon. Israel originally invaded Lebanon in March following rocket and drone attacks by the Iran-backed group Hezbollah.
While both Lebanon and Israel stated on 3 June that they had agreed to a ceasefire following negotiations in Washington, a previous cessation of hostilities in April failed to end the violence.
The broader conflict has been largely deadlocked since the US and Israel paused direct attacks on Iran in early April.
However, the economic impact persists as Tehran continues to block most shipping through the Strait of Hormuz – the transit route for one-fifth of global oil supplies – while Washington maintains its own blockade of Iranian ports.
OPEC+ production challenges
In response to the resulting supply crisis, OPEC+ members agreed on Sunday to their fourth production increase in four months. However, analysts suggest the move will have minimal effect on the market.
Most OPEC+ members are currently unable to meet their output targets due to the closure of the Strait of Hormuz or, in the case of Russia, attacks on infrastructure that have diminished its production capacity.
Jorge Leon, head of geopolitical analysis at Rystad Energy, noted in a report to clients that the actual physical impact of the OPEC+ decision would be “close to zero” in the current market environment.
