Oil prices rose approximately 3% on Monday as geopolitical tensions escalated in key shipping regions. Crude oil gained 2.32% to $102.376 per barrel, while Brent crude climbed 2.52% to $107.251 per barrel, driven by concerns over disrupted energy supplies.
The price surge followed reports of attacks on tankers in the Red Sea and Gulf of Guinea, attributed to Iran-backed groups. The Houthis expanded operations in the Red Sea region, taking control of the Greater and Lesser Hanish Islands, positions that increase proximity to a critical shipping lane. The group also launched missiles and drones at Saudi military targets.
Supply pressures intensified after Saudi Arabia suspended operations on its East-West oil pipeline following recent attacks. The pipeline, which connects Saudi oil fields to the Red Sea port of Yanbu, has a capacity of approximately 7 million barrels per day. Asian refiners are seeking clarity on crude deliveries from Yanbu amid the suspension.
Discussions between Iran and Gulf Arab nations regarding temporary shipping arrangements through the Strait of Hormuz were suspended, with Iran attributing the decision to Saudi Arabia's involvement.
Fed Rate Decision in Focus
Energy market volatility arrives as the Federal Reserve prepares for its September 15-16 policy meeting. Market pricing shows an 86.5% probability of a 25 basis point rate increase, which would raise the federal funds target range to 3.75%-4.00%. A 13.5% probability remains for unchanged rates.
Goldman Sachs and JPMorgan both expect the Fed to raise rates by 25 basis points. The rate hike odds increased following recent inflation data, as markets assess whether higher energy prices will influence the central bank's monetary policy decision.
