Oil prices rose on Monday after the US military announced it had launched an operation to restore freedom of navigation in the Strait of Hormuz.
international benchmark brent Crude oil futures were up about 4% at $112.69 a barrel by 11:09 a.m. ET. us west texas intermediate Futures rose nearly 2% to $103.74 a barrel.
President Donald Trump said Sunday that the United States would guide civilian ships through the strait. Iran has blocked sea lanes for weeks, causing the largest oil supply disruption in history.
The U.S. military operation, dubbed “Project Freedom,” is being supported by a U.S. guided-missile destroyer, more than 100 aircraft and unmanned platforms, U.S. Central Command announced Monday. However, there is confusion about how aggressively the US military will intervene in the strait, and the Axios report indicates the operation will be limited.
U.S. officials told Axios there are currently no plans for a full-scale naval escort. In return, the U.S. Navy will advise ships on how to avoid mines and be prepared to intervene if a ship is attacked, according to the Axios report. U.S. officials told Axios that the military has been authorized to issue an immediate threat to ships crossing the strait.
The Iranian military warned on Monday that it would attack US warships approaching the strait, the state-run Tasnim news agency reported. The US military denied Iranian media reports that the Revolutionary Guards attacked a US warship with two missiles.
“No U.S. Navy vessels were attacked,” Centcom said in a social media post. “The US military supports Project Freedom and is blockading Iranian ports.”
Centcom announced on Monday that two U.S.-flagged commercial vessels had safely passed through the strait.
The operation comes after at least two commercial vessels were attacked in or near the Strait over the weekend. A tanker was attacked by a projectile north of Fujairah in the United Arab Emirates, and a bulk carrier was attacked by several smaller ships off the coast of Iran, according to an incident report from the British Maritime Trade Operations Center.
The United Arab Emirates said on Monday that Iranian drones targeted a ship affiliated with the country’s state oil company ADNOC. He condemned Iran’s attacks on commercial ships as “an act of piracy.”
Traders will also take stock of OPEC+’s agreement to increase production by 188,000 barrels a day in the cartel’s first meeting since the withdrawal of its main member, the United Arab Emirates.
exxon mobil Chief Executive Officer Darren Woods said on Friday that markets had not fully absorbed the impact of Iran’s blockade of the Strait. He warned that oil prices are likely to rise further.
“The unprecedented disruption in global oil and natural gas supplies makes it clear to most that the market has not yet seen the full impact,” Woods told investors on Exxon’s first-quarter earnings call.
“More things will happen if the Straits remain closed,” he said.
