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Fears of supply disruption are driving up oil prices as a result of the Israel-Iran conflict

Fears of supply disruption are driving up oil prices as a result of the Israel-Iran conflict

Early Asian trade on Monday saw oil prices rise after Israel and Iran launched new attacks on Sunday. This heightened fears of escalating conflict that could lead to a wider regional conflict, and disrupt Middle East oil exports.

Brent crude futures rose $1.70 or 2.3% to $75.93 per barrel at 2253 GMT. U.S. West Texas Intermediate futures gained $2.02 or 2.2% to $74.60. They were up more than $4 in the earlier part of the session. Both benchmarks closed 7% higher Friday after a session that saw them surge more than 13% to their highest level since January. Both militaries warned that the latest strikes between Israel, Iran and Syria resulted in civilian deaths and increased fears of a wider regional conflict.

Recent developments have raised concerns over disruptions in the

Strait of Hormuz

A vital shipping passage.

a fifth

The strait is responsible for about 18-19 million barrels of oil per day, including fuel, condensate, and oil.

Donald Trump, the U.S. president, said Sunday that he hoped Israel and Iran could broker a deal.

Stop the violence

But sometimes, he said, countries must fight it out before they can work together. Trump stated that the U.S. would continue to support Israel, but refused to reveal if he had asked the U.S. allie to pause their strikes against Iran. Friedrich Merz, the German Chancellor, said that he was hopeful for a resolution to the conflict at the Group of Seven Leaders meeting in Canada this Sunday. An official who was briefed about the communications said that Iran had told Qatar and Oman it would not be open to negotiations for a ceasefire as long as Israel is attacking. The two enemies launched new attacks on Sunday and raised fears of an even wider conflict.

Iran is a member of the Organization of Petroleum Exporting Countries and currently exports over 2 million barrels of fuel and oil per day.

Analysts and OPEC observers say that the spare capacity of OPEC, its allies and Russia to pump more crude oil to offset disruptions is about equal to Iran's production. (Reporting and editing by Matthew Lewis in Tokyo, and Paul Simao.)

(source: Reuters)