Oil rises as Iran demands U.S. withdrawal to reopen Strait of Hormuz

UAE says Iran launched missile attack on its tanker

Oil prices rose in Asian trading Monday as doubts deepened over when the Strait of Hormuz will reopen, after a senior Iranian official set conditions and the United Arab Emirates reported attacks on its tankers. Front-month Brent crude futures gained 0.3% to $83.80 a barrel, while West Texas Intermediate rose 0.1% to $78.29, ICE data showed.

Mohammad Bagher Zolghadr, secretary of Iran’s Supreme National Security Council, said the U.S. would need to withdraw its forces, end all sanctions, and free Iran’s frozen assets for the strait to reopen, according to a report on state news agency IRNA. The strait, a key waterway through which one-fifth of the world’s oil is transported, remains a key negotiating tool for Iran and the U.S., said Ahmad Assir, research strategist at Pepperstone.

The United Arab Emirates said Iran launched a missile attack on one of its ships. Analysts at ANZ Research said Abu Dhabi National Oil Co. reported that three of its tankers were attacked while transiting the strait last week. “Tensions remain high in the Middle East,” the analysts said.

Iran’s firm tone is helping keep some premium in oil prices despite easing risks of a military confrontation, Assir added. The U.S. dollar found modest support during the Asian session, but uncertainty around the opening of the strait is keeping risk sentiment cautious, said Samara Hammoud, currency strategist at Commonwealth Bank of Australia.

Asia-Pacific equity markets were mostly higher, looking past persistent geopolitical uncertainties after a weaker-than-expected U.S. nonfarm payrolls report released Friday reduced expectations for an interest-rate increase by the Federal Reserve in September. “Markets treated the report as a meaningful challenge to near term Fed rate hike expectations, effectively concluding the Fed has time on its side,” Rodrigo Catril, senior FX strategist at National Australia Bank, said in commentary. “The soft payrolls report lowered near-term rate risk and supported the growth and technology complex,” Catril added.

Japan’s Nikkei Stock Average rose 2.0%, led by technology company Recruit Holdings jumping 23% and medical diagnostics provider Sysmex climbing 19%. South Korea’s Kospi added 0.5%, while Taiwan’s Taiex was 1.8% higher.

Attention has shifted to U.S. inflation data due this week, where a softer-than-expected figure “would soothe hawkish Fed expectations and keep the market mood in a sweet spot,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

Spot gold traded 0.2% higher, holding above $4,300 a troy ounce. Gold is likely to remain sensitive to both geopolitical headlines and the outlook for U.S. yields and monetary policy pricing, Assir said.