Oil prices climbed sharply on Monday after a drone attack near a nuclear power plant in the UAE heightened fears of fresh hostilities in West Asia.
At 7:20 am, the July contract of Brent on the Intercontinental Exchange was at $111.56 per barrel, up 2.18% from its previous close. The June contract of West Texas Intermediate on the NYMEX rose 2.64% to $108.20 a barrel.
Calling the incident a “dangerous escalation”, the UAE said a drone strike had triggered a fire near its nuclear power station on Sunday.
A BBC report said officials are investigating the source of the strike. While two drones were intercepted, the third drone struck an electrical generator “outside the inner perimeter” of the Barakah Nuclear Power Plant in Abu Dhabi, sparking a fire. No injuries were reported and there was no impact on radiological safety levels, local authorities said.
Saudi Arabia also said it intercepted three drones on Sunday.
Trump’s warning
Keeping markets on edge, warned Iran that the “clock is ticking” for a peace deal to be reached with Washington.
Taking to social media platform Truth Social, he said: “For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them,” adding that “TIME IS OF THE ESSENCE!”
Although a fragile ceasefire was reached in April, tensions between Iran and the US continue. Iran’s blockade of the and the US administration’s naval blockade of Iranian ports continue to impact 20% of the global energy trade.
Supply squeeze
The International Energy Agency, in its monthly oil market report for May, said the market will remain severely undersupplied through the end of Q3 2026, even if the conflict ends by early June.
The IEA noted that there is currently a shortage of about 6 million barrels per day. The cumulative global supply loss already stands at more than 1 billion barrels and could reduce global production by 3.9 million barrels per day across 2026.
India impact
The conflict has also severely impacted energy supplies to India. After keeping petrol and diesel prices unchanged for the past two years, by around ₹3 on 15 May.
The price of the India basket of crude oil as of 14 May was $108.36 a barrel.
The Indian basket of crude oil represents a derived basket comprising the Sweet grade (Brent Dated) and Sour grade (Oman & Dubai average) crude imported by Indian refineries.