Oil prices rose more than 2% on Monday, August 31, pushing Brent crude above $90 a barrel as renewed fighting between the United States and Iran revived concerns over energy supplies through the Strait of Hormuz.
The move followed US strikes on Iranian rocket launchers on a small island in the strategic waterway, the first American attack on Iran in a month. Iran responded with missile strikes on US military targets in Jordan.
US President Donald Trump said Washington would retaliate against the Iranian strikes, according to Fox News.
The escalation came shortly after the US-Iran war reached the six-month mark. The Strait of Hormuz, normally used to transport about one-fifth of global crude oil and gas supplies, remained largely closed.
Stephen Innes of Quintex Intel said the renewed exchange showed how quickly geopolitical risk could return to oil pricing after physical flows through the Strait of Hormuz had improved from earlier lows.
Equity markets also weakened. Wall Street extended Friday’s decline, with the Dow Jones Industrial Average falling 0.7% at Monday’s close, while major European markets delivered mixed performances.
Investors were also reacting to Federal Reserve Chair Kevin Warsh’s recent signal that US interest-rate increases could be imminent as inflation remains elevated, partly due to high energy costs.
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Expectations for a September rate increase had already strengthened after Warsh’s Jackson Hole speech on Friday.
US labour-market data due Friday is expected to influence those expectations. Jay Woods of Freedom Capital Markets said stronger-than-expected payroll and wage figures could reinforce expectations that the US economy can withstand tighter monetary policy.
Trump is scheduled to meet oil-refining executives on Tuesday as his administration seeks to address elevated US petrol prices ahead of the November midterm elections.
