Global crude oil prices climbed further on Monday, pushing Brent crude reaching its highest level since early May, following a reported drone strike targeting a nuclear power plant in the United Arab Emirates (UAE). This upward price momentum comes against a backdrop of stalled diplomatic efforts between the region, with peace talks between the U.S.-Israeli bloc and Iran have broken down, and emerging indications that Washington is actively considering military options against Tehran.
By Monday’s market close, benchmark Brent crude had advanced $1.44, or 1.32%, to settle at $110.70 per barrel. U.S. West Texas Intermediate (WTI) crude rose $1.84, equal to a 1.75% gain, to hit $107.26 per barrel, also its highest level since early May. Last week alone, both major crude contracts surged more than 7%, driven by fading market optimism over a potential peace deal that would end attacks and ship seizures around the Strait of Hormuz, the critical chokepoint through which roughly 20% of global oil trade passes.
Recent drone strikes targeting infrastructure in both the UAE and Saudi Arabia, paired with increasingly heated rhetoric between the U.S. and Iran, have stoked widespread market fears of a full escalation of conflict in the oil-rich Gulf region. UAE officials are currently investigating the origin of the attack on the Barakah nuclear power plant, and have reaffirmed the country’s right to respond to what they label as terrorist attacks on sovereign territory.
Separately, Saudi Arabia announced it had intercepted three drones that entered its airspace from Iraqi territory, and issued a warning that it would take all necessary operational measures to protect its national sovereignty and domestic security.
Tony Sycamore, a market analyst at IG Markets, noted that the recent string of drone attacks acts as a clear warning to global powers. “Renewed U.S. or Israeli military strikes against Iran could trigger a wave of additional proxy attacks on energy infrastructure and critical facilities across the Gulf region, carried out by Iran or its regional allied groups,” Sycamore explained.
U.S. news outlet Axios also reported that former U.S. President Donald Trump is preparing to convene a meeting with his national security advisory team to discuss a range of potential military actions against Iran.