Oil rises as US, Iran trade strikes, Israel moves further into Lebanon

US crude futures up $2.88 to $90.24 a barrel as of 12:01pm PST, Brent futures rose $2.78 to $93.9 a barrel

Oil prices rose more than ​3% on Monday after Iran and the US traded strikes and Israel ordered troops to move further into Lebanon in ‌its battle with Tehran-backed Hezbollah.

US crude futures rose $2.88 or 3.3% to $90.24 a barrel as of 07:01am GMT (12:01pm PKT). Brent futures rose $2.78 or 3.05% to $93.9 a barrel.

The fighting, after Washington hosted Israel-Lebanon peace talks on Friday, dimmed hopes that the US and Iran could soon announce an extension to their ​ceasefire, which had driven Brent and WTI to settle down 1.8% and 1.7%, respectively, on Friday.

The US said on ​Sunday it conducted "self-defence strikes" on radar and drone control sites in Iran's Goruk and Qeshm Island ⁠over the weekend in what it said was a response to "aggressive" actions by Tehran.

Iran's elite Islamic Revolutionary Guard Corps said ​on Monday its aerospace force targeted an air base used in what it called a US attack on a telecoms tower ​on Sirik Island.

Also Read: Lebanon ceasefire ‘essential’ for deal with US: Iranian FM spokesperson

US President Donald Trump said on Friday he would soon decide on a proposed deal to extend a ceasefire announced in early April, giving negotiators more time to seek a permanent end to the war and find a solution to the underlying dispute over Iran's nuclear programme.

Israel would ​be key to any such deal, and Iran has said repeatedly that Hezbollah must be included. The US has proposed a "gradual ​de-escalation" plan under which Hezbollah would first stop attacks on Israel in exchange for Israel refraining from escalation in Beirut, a US official ‌said ⁠on Sunday.

Concerns are rising about mines in the Strait of Hormuz, a key oil and gas shipping lane, IG analyst Tony Sycamore said in a note. That could slow the process of reopening the waterway and mean that relief comes more slowly for the oil market even after it is reopened.

"Even if an agreement is reached, it won't deliver a flood of supply," ​Sycamore said.

Read More: Israel seeks US approval to expand airstrikes to Beirut

An Axios reporter said ​on X on Friday ⁠that Iran had dropped more mines in the strait earlier in the week, shortly after US War Secretary Pete Hegseth said that attempts to lay more mines would be a violation of ​the ceasefire.

The Strait is a conduit for about a fifth of global oil and gas ​flows and Iran ⁠has effectively closed it since the conflict began with US and Israeli strikes on February 28.

Concerns over supply outweighed weekend economic data from China which showed stalling factory activity. This added to concerns the world's second-largest economy is losing momentum, weighed down by a ⁠contraction in ​exports and cost pressures.

Goldman Sachs said on Sunday weak oil demand in China ​and Europe poses a major downside risk to its fourth-quarter Brent crude forecast of $90 a barrel and WTI forecast of $83, although Middle East supply disruptions could ​still push prices higher.