Oil prices rose more than 2%
in early trading on Monday after Israel ordered troops to move
further into Lebanon in the battle with the Iranian-backed
Hezbollah militant group, despite a ceasefire announced more
than six weeks ago.
U.S. crude futures rose $2.17 or 2.48% to $89.53 a barrel
as of 1112 GMT. Brent futures rose $1.93 or 2.12% to
$93.05 a barrel.
The stepped-up fighting, coming just after the U.S. hosted
Israeli-Lebanon peace talks in Washington on Friday, dimmed
expectations that the U.S. and Iran could soon announce an
extension to their ceasefire agreement, which had driven Brent
and WTI to settle up 1.8% and 1.7%, respectively, on Friday.
The Israel-Lebanon conflict has been the broadest spillover
of the Iran war. It started on March 2 when Hezbollah began
firing rockets and drones across the border into Israel to back
its ally Iran.
The two sides reached a ceasefire in mid-April but have
continued to trade fire.
U.S. President Donald Trump said on Friday that he would
soon decide on a proposed deal to extend a ceasefire with Iran
announced in early April, giving negotiators more time to seek a
permanent end to the conflict and find a solution to the
underlying dispute over Iran’s nuclear program. Israel would be
key to any such deal, and Iran has also said repeatedly that
Hezbollah must be included.
Meanwhile, concerns are rising about mines in key oil and
gas shipping lane the Strait of Hormuz, IG analyst Tony Sycamore
said in a note. That could slow the process of reopening the
strait and mean that relief comes more slowly for the oil market
even after it is reopened.
“Even if an agreement is reached, it won’t deliver a flood
of supply,” Sycamore said.
An Axios reporter said on X on Friday that Iran had dropped
more mines in the strait earlier in the week, shortly after U.S.
Defense Secretary Pete Hegseth said that attempts to lay more
mines would be a violation of the ceasefire.
Hormuz is a conduit for about a fifth of global oil and gas
flows and Iran has effectively closed it since the conflict
began with U.S. and Israeli strikes in February.
Concerns over supply outweighed lacklustre economic data
from China over the weekend, which showed stalling factory
activity. This added to concerns the world’s second-largest
economy is losing momentum, weighed down by a contraction in
exports and cost pressures.