Oil rises over 1% after U.S. warns ships to avoid Iranian waters near Hormuz

Oil prices climbed more than 1% on Monday after the U.S. Department of Transportation advised U.S.-flagged vessels to avoid Iranian territorial waters while transiting the Strait of Hormuz and the Gulf of Oman, reviving concerns over potential supply disruptions.

Brent crude futures rose 89 cents, or 1.3%, to $68.94 a barrel by 1624 GMT, while U.S. West Texas Intermediate crude gained 83 cents, or 1.3%, to $64.38.

The U.S. Maritime Administration said ships in the region have historically faced the risk of being boarded by Iranian forces, including as recently as Feb 3, and recommended U.S.-flagged vessels stay close to Oman when traveling eastbound through the strait. Roughly one-fifth of global oil consumption passes through the Strait of Hormuz.

Analysts said the warning highlighted persistent geopolitical risks. “The Iranian risk premium cannot be fully defused as long as U.S. warships are located where they are,” SEB analyst Bjarne Schieldrop said.

Oil prices had fallen earlier in the session, extending losses from last week after the United States and Iran said indirect talks would continue following what both sides described as positive discussions. However, Iran’s foreign minister said on Saturday that Tehran would strike U.S. bases in the Middle East if attacked, amid a recent buildup of U.S. naval forces in the region.

“Extremely difficult to judge how it is evolving,” UBS analyst Giovanni Staunovo said, adding that markets are watching for a date for the next round of talks.

Investors are also tracking Western efforts to limit Russia’s oil export revenues. The European Commission has proposed a broad ban on services supporting Russia’s seaborne crude exports. Indian refiners, previously among the largest buyers of Russian crude, are avoiding April deliveries, sources said, which analysts described as potentially bullish if sustained.

In Kazakhstan, production at the Chevron-led Tengiz oil field has recovered to about 60% of peak output and is targeting full production by Feb 23, sources added.