Oil prices surged on Monday as markets renewed concerns over the risk of conflict in the Middle East after US President Donald Trump issued a stern warning to Iran over the impasse in peace talks and the issue of reopening the Strait of Hormuz.
Brent crude for July delivery rose 1.98% to $111.42 a barrel, while US West Texas Intermediate (WTI) crude rose 2.43% to $107.98 a barrel, hitting its highest level this month.
Market sentiment became increasingly tense after Trump warned Iran via the Truth Social platform that it must act quickly or face consequences greater than Washington.
The statement reinforced concerns that armed conflict between the US and Iran could erupt again in the near future.
Despite a fragile ceasefire reached in April, tensions between the two countries have not subsided. Iran has reportedly continued to tighten control of the Strait of Hormuz, while the Trump administration is still maintaining sanctions on Iranian ports.
The Strait of Hormuz is the world's most important energy trade route, with nearly a fifth of global oil and gas supplies passing through the area before the conflict broke out. Any disruption in the route could have a major impact on global energy supplies.
Meanwhile, the International Energy Agency (IEA) has warned that global oil inventories are rapidly declining due to ongoing disruptions in the Strait of Hormuz.
According to the IEA, the reduction in oil stocks while global supplies are still disrupted could trigger a larger price spike in the coming period.
Swiss bank UBS expects world oil inventories to approach an all-time low of around 7.6 billion barrels by the end of May if global oil demand remains high.
