Oil prices extended their rally on Monday, jumping more than 2% as intensifying geopolitical tensions kept traders on edge and efforts to de-escalate the Middle East conflict showed little progress. Sentiment was further shaken after reports of an attack on a nuclear power plant in the United Arab Emirates. Alongside this, US President Donald Trump is expected to consider potential military options against Iran during upcoming discussions.Global benchmark Brent crude stood at $111.5, rising $2.23 or 2.04%, while WTI crude traded at $108.0, up $2.54 or 2.41%, around 7 am IST.These latest gains come on top of an already sharp rally last week, which saw both benchmarks add more than 7%. Oil prices have continued to soar ever since the US and Israel launched joint strikes on Iran on February 28. In retaliation, Tehran squeezed flow through the strategically crucial Strait of Hormuz, a passage through which 20% of global energy supplies flow. Now, as peace efforts to ease disruptions to shipping and reduce seizures and attacks around the Strait of Hormuz have faltered, oil continues to stay above the $100 mark, up from the earlier $70 per barrel level.Tensions in the Gulf region intensified further after a series of drone incidents involving the UAE and Saudi Arabia, alongside increasingly sharp exchanges between Washington and Tehran. Officials in the UAE, cited by Reuters, said that they were investigating a strike on the Barakah nuclear power plant and stated that the country retained the full right to respond to what they described as “terrorist attacks.“Saudi Arabia reported that it intercepted three drones entering its airspace from Iraq and warned it would take necessary operational steps to defend its sovereignty and security.“These drone strikes are a pointed warning – renewed US or Israeli strikes on Iran could trigger more proxy attacks on Gulf energy and critical infrastructure by Iran or its regional proxies,” said IG market analyst Tony Sycamore.According to Axios, Trump is scheduled to meet senior national security advisers on Tuesday to discuss potential military action related to Iran.Meanwhile, Moody’s Ratings said that oil-importing nations are expected to pursue bilateral arrangements to secure energy supplies, potentially through coordinated transit corridors. In its global assessment of geopolitical risk, the analytical firm said that there is little evidence of a near-term or durable settlement between the US and Iran, limiting the chances of a full reopening of the Strait of Hormuz.Commenting on oil prices, the agency said, “We now expect Brent crude in the USD 90-110/bbl range for much of this year, with significant volatility, including occasional fluctuations outside this range in response to new developments.” It further added that sustained prices in this range could reduce real GDP growth by 0.2 to 0.8 percentage points across several major economies.
