Oil settles up by more than 2.5% as US and Iran resume military attacks

By Georgina McCartney

HOUSTON, Aug 31 (Reuters) - Oil ‌prices settled more than ​2.5% ​higher on Monday after a resumption of military action between the U.S. and Iran rekindled market concerns about global supply disruption, as the conflict extended into its sixth month.

Brent crude futures ‌settled up $2.39, or 2.71%, to $90.49 a barrel. U.S. West Texas Intermediate crude settled up $2.36, or ⁠2.83%, to $85.76. Brent rose as high as $91.52 during the session, its highest since August 25.

U.S. President Donald Trump was quoted as ‌promising to "hit them hard" after Iran ‌launched missiles overnight at two U.S. air bases in Jordan in response to an attack on Iran's Larak Island.

"We're going to hit them hard," a Fox News reporter quoted Trump as telling the channel. "There will ​be a response."

Last week, crude stocks in the U.S. Strategic Petroleum Reserve fell by around 3.1 million barrels to 286.6 million barrels.

MARKET FOCUSES ON WHETHER SITUATION WILL DE-ESCALATE

On Sunday, Trump said in a social ⁠media post that Iran's energy hub of Kharg Island was being "blown to smithereens," but there was no evidence the island was under attack. The ​post, which included an AI-generated video, provided no further details. Iran denied the island was being attacked and said oil operations continued there.

On Monday, Vice President JD Vance ​said Trump was sending a message to Iran with the ‌post.

Mediators are seeking a deal to reopen the Strait of Hormuz, through which a fifth of global oil supplies passed before the war began in late February. ⁠Progress has stalled.

Shipping data showed the number of visible commodity vessels transiting the strait over the weekend fell to five a day.

"Some Gulf barrels continue moving through the strait, tempering the rally, but the first direct military exchange in a month ⁠has forced traders to rebuild a meaningful near-term supply premium," Gelber & Associates analysts wrote in a note.

U.S. Treasury Secretary Scott ​Bessent told CNBC in an interview on Monday that the goal of U.S. sanctions on Iran is "to create the conditions that they will want to come to the table" for negotiations.

Potentially easing supply concerns, Trump said on Sunday that oil secured ‌under a deal with Venezuela would be used to replenish the U.S. Strategic Petroleum Reserve, which has fallen to near its lowest level in 44 years.

U.S. companies ‌Chevron and GE Vernova, India's ONGC, Italy's Eni and Colombia's GeoPark are on track to sign final agreements in ⁠Venezuela after months of negotiations to firm up ‌energy projects in the OPEC country, ​four sources close to the preparations said.

(Reporting by Georgina McCartney in Houston, Enes Tunagur in London, Florence Tan and Colleen Howe; Editing by Kirsten Donovan, Mark Potter, Barbara Lewis and ‌David Gregorio)

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