Oil prices extended gains during Asian deals on Monday, reaching two-week highs as efforts to end the United States-Israeli conflict with Iran appeared to stall following a drone attack on a nuclear power plant in the United Arab Emirates (UAE) and reports that President Donald Trump may consider military options against Tehran.
By 2:45 pm AEST (4:45 am GMT), Brent crude futures rose US$2.08, or 1.9%, to $111.34 per barrel, while U.S. West Texas Intermediate (WTI) crude for July delivery climbed $2.30, or 2.3%, to $103.19 per barrel.
Brent and WTI contracts rallied 7.9% and 5.9% respectively last week as hopes faded for a peace agreement that would end attacks and seizures around the Strait of Hormuz.
Last week’s talks between Trump and Chinese President Xi Jinping concluded without any indication that China would use its influence with Iran to help resolve the conflict.
ANZ analysts said in a client note: “Trump left the meeting with Xi without any progress on a plan to reopen the Strait of Hormuz. The market was hoping China would utilise its relationship with Iran to encourage the oil producer to loosen its grip over the waterway.
"This raised concerns that disruptions to oil supplies will remain for the foreseeable future. Those concerns will be heightened after reports over the weekend suggesting Israel is looking at a resumption of the conflict.”
Investor concerns intensified after drone incidents in both the UAE and Saudi Arabia raised fears of a broader regional escalation.
Emirati officials said they were investigating the source of the strike on the Barakah nuclear power plant and stressed the UAE had the right to respond to such “terrorist attacks”.
Saudi Arabia, which intercepted three drones entering from Iraqi airspace, warned it would take all necessary operational measures to protect its sovereignty and security.
Trump is reportedly expected to meet senior national security advisers on Tuesday to discuss potential military responses involving Iran, according to Axios.
In a separate development supporting oil prices, the Trump administration allowed a sanctions waiver to expire on Saturday that had previously permitted countries, including India, to continue purchasing Russian seaborne oil following a one-month extension.
ING analysts said in The Commodities Feed: “The latest data from Baker Hughes indicates that U.S. producers may finally be responding to the higher price environment. The number of active oil rigs increased by 5 over the last week to 415, the highest count since November 2025.
"The cumulative increase in rigs over the last 3 weeks totals 8. Meanwhile, Primary Vision’s frac spread count also shows a pickup in completion activity. Its count has increased to 184- up 5 WoW and the highest since June last year.”
