Oil Prices Climb Over 2.5% as US-Iran Military Attacks Resume

• Oil prices settled more than 2.5% higher on Monday, August 31, 2026, after a resumption of military action between the US and Iran rekindled market concerns about global supply disruptions. Brent crude futures settled 2.7% higher at US$90.49 per barrel, while US West Texas Intermediate (WTI) crude rose 2.8% to US$85.76 per barrel.
• The increase followed the first direct military exchange between the US and Iran in a month. Early on August 31, Iran launched ballistic missiles at two US air bases in Jordan in response to a US attack on Iran’s Larak Island the previous night. US President Donald Trump subsequently promised to retaliate. The renewed military exchange forced traders to rebuild a meaningful near-term supply premium into oil prices.
• Market attention remains focused on whether the situation will de-escalate and on efforts to reopen the Strait of Hormuz. Progress on a deal to reopen the strait has stalled, while shipping data showed that the number of visible commodity vessels transiting the waterway over the weekend fell to five per day. However, some Gulf barrels continue to move through the strait, tempering the rally in oil prices.
• Potentially easing supply concerns, Trump announced that oil secured under a deal with Venezuela would be used to replenish the US Strategic Petroleum Reserve (SPR). The SPR fell by around 3.1Mn barrels last week to 286.6Mn barrels, near its lowest level in 44 years.
• The renewed increase in oil prices is adding to inflation concerns and keeping alive the risk of further interest rate increases from major central banks. In the US, Fed funds futures traders are pricing in a 64% probability of a September rate hike. Longer-dated US Treasury yields also rose, with the benchmark 10-year yield reaching 4.764%, its highest since January 2025. The August payrolls report and consumer price data will be key in determining whether the Fed raises rates at its September meeting.

(Source: Reuters)