Oil surges to six-week high as Iran threatens Hormuz shipping zone

Brent crude climbed to $97.14 a barrel on Monday, a six-week high, after the United States struck three Iranian oil tankers over the weekend and Tehran responded by vowing to police a newly declared restricted zone in the Strait of Hormuz. The benchmark is now up more than 10 percent over the past month and roughly 40 percent above levels recorded before the outbreak of the U.S.-Iran war earlier this year, according to pricing data tracked Monday.

U.S. Central Command said it struck the tankers M/T Downy, M/T Stark 1 and M/T Kylo near Kharg Island, Jask and in the Gulf of Oman on Saturday, retaliation for an Iranian Revolutionary Guard Corps ballistic-missile attack on two U.S. Navy warships days earlier. Vice Adm. Brad Cooper framed the strikes bluntly: "If you shoot at two of our ships, we will impose an even higher economic cost — taking out three of yours," he said, according to an account of the operation. West Texas Intermediate, the U.S. benchmark, traded near $92 a barrel in the same session.

Iran moves to assert control of the strait

Iranian officials answered with some of their sharpest rhetoric of the conflict. Parliament speaker Mohammad Bagher Qalibaf declared the era of "proportionate responses" over, warning that future retaliation would be "faster, heavier and more painful," while Mohsen Rezaei, secretary of Iran's Supreme National Security Council, said Tehran would require vessels to coordinate directly with Iran before transiting a new restricted maritime zone extending beyond Hormuz into the Persian Gulf. Ships that entered without doing so, he said, would be added to Iran's sanctions list. Tehran has been negotiating with Oman for weeks over shared management of the corridor, though the International Maritime Organization said it had not yet received a formal proposal.

The announcement adds a fresh layer of uncertainty to a waterway that normally carries roughly a fifth of the world's seaborne oil. Traffic through the strait has already fallen to its lowest level since May as shippers reroute or delay cargoes, and the U.S. Navy said it has redirected 92 commercial vessels, disabled three and boarded two since launching a blockade operation on July 14. Estimates of how much oil is still moving vary sharply: U.S. Energy Secretary Chris Wright has put daily flows above 9 million barrels, while independent tanker-tracking estimates over the past month put the figure closer to 5 million barrels a day, complicated by vessels that have switched off their transponders to avoid detection.

Wall Street watching for spillover

Goldman Sachs analysts have warned crude could climb toward $120 a barrel if attacks on shipping continue to escalate, a scenario that would ripple quickly into pump prices already near record highs in parts of the United States. Energy traders have grown accustomed to the tit-for-tat pattern of strikes and countermeasures that has defined the conflict since February, but the combination of a direct hit on Iranian tankers and Tehran's move to assert quasi-territorial control over transit through Hormuz marks an escalation traders said they had not fully priced in heading into the weekend. Refiners and shipping insurers were watching Monday for signs of whether the restricted zone would be formalized with Oman's backing or remain a unilateral Iranian declaration, a distinction market participants said would determine whether major carriers attempt further transits in the days ahead.