Oil Prices Jump as Brent Tops $110 After Iran Says Mines Hit Tankers in Hormuz and Houthis Strike Saudi Sites

NEW YORK — Oil prices rose more than $1 a barrel Wednesday. New attacks on tankers near the Strait of Hormuz and on Saudi energy facilities raised fears of further supply disruptions, and falling U.S. inventories added to the pressure.

Brent crude, the international benchmark, rose $1.59, or 1.5%, to $110.38 a barrel by early Wednesday in Asia, and later traded around $110.70. U.S. benchmark West Texas Intermediate crude rose $1.36, or 1.4%, to $99.18. Later in the session it moved close to $100 a barrel, a level it has not reached for weeks.

The gains reversed Tuesday's decline. Brent had settled at $108.79 after Iran's president discussed possible mediation with Pakistan's army chief in Tehran, which briefly raised hopes for an end to the conflict.

Mines, missiles and supertankers

The latest rise followed a statement Tuesday from Iran's Islamic Revolutionary Guard Corps. The Guard said its naval mines had stopped three tankers trying to pass through the Strait of Hormuz on routes Tehran considers unauthorized. It said two tankers caught fire, and a third tanker, carrying more than 2 million barrels of crude, exploded after hitting a mine.

Iran's state broadcaster IRIB separately reported that a supertanker had struck a sea mine in the strait. It did not name the vessel or say when the incident happened.

U.S. Central Command rejected Iran's account. A spokesman said Iran's claims that tankers had hit mines were false and that U.S. forces had cleared mines from the international shipping lanes in the strait.

Whether the claims are true or not, analysts say the threats alone are making shipping companies more cautious. Maritime data firm Kpler has recorded at least 18 attacks on vessels over the past two weeks.

"Attacks on tankers have expanded beyond the Strait of Hormuz," LSEG analysts said in a note. They said Iran was now targeting ships as far as the Gulf of Oman. That threatens oil loadings outside the Persian Gulf and the ship-to-ship transfers that have helped keep Middle East exports moving.

Saudi infrastructure targeted

Concerns also grew around Saudi Arabia, the world's largest crude exporter. On Monday, Yemen's Iran-backed Houthi rebels claimed responsibility for attacks on a Saudi Aramco site in Yanbu, the Shaybah oilfield, and airports in Riyadh and Abha.

Yanbu, on the Red Sea coast, has become more important during the war because Saudi Arabia has used it to export crude without passing through Hormuz. Any lasting damage there could cut one of the few alternative routes for Gulf oil.

Iranian Foreign Minister Abbas Araghchi said in a television interview aired Tuesday that Iran had received no response from Saudi Arabia or the Houthis to its offer to help broker peace talks.

U.S. stockpiles shrink

The market also found support in the United States. According to market sources citing American Petroleum Institute data, U.S. crude stockpiles fell by 4.9 million barrels in the week ended Oct. 16. That was far larger than the roughly 800,000-barrel drop analysts had expected in a Reuters poll. Fuel inventories also declined.

Official data from the U.S. Energy Information Administration is due later Wednesday.

Diesel has become a particular problem. Two U.S. Energy Department officials said Tuesday they were working with refiners around the world to increase fuel production, as a diesel shortage has pushed up prices.

Shipping costs soar

The conflict has sent global tanker freight rates sharply higher, adding to the cost of moving oil. In a note to clients, Goldman Sachs analysts said high freight costs had "weighed particularly heavily on Asian refineries' net margins." They warned this could reduce refined fuel output and raise global fuel prices. The bank also said higher shipping costs could widen price gaps between different grades of crude.

Eight months of disruption

Oil markets have been unsettled since Feb. 28, when the United States and Israel launched strikes on Iran. Tehran responded by largely closing the Strait of Hormuz. Before the war, about one-fifth of the world's oil passed through the waterway.

Prices have risen sharply. Brent is up about 77% from a year ago and more than 11% over the past month. Its 52-week range runs from about $59 to more than $126 a barrel.

Crude traffic through the strait recovered to near pre-war levels in September before falling again in October as attacks increased. Kpler data showed crude flows through the strait averaged about 8.5 million barrels a day in the week ended Oct. 7, roughly 40% below normal.

Diplomacy stalls

Efforts to end the conflict have made little progress. Iranian media reported that Tehran told Pakistan's army chief, Field Marshal Asim Munir, during his visit that there would be no talks with Washington until Iran's demands were met. Qatar has also been trying to restart negotiations.

Some traders had bet on a Qatar- or Pakistan-brokered agreement. Analysts said Wednesday's price action suggested the market now sees any deal as distant.

Inflation concerns spread

Higher energy prices are adding to worries about inflation. U.S. consumer prices rose 3.7% in September from a year earlier, above expectations. That has reduced hopes for interest rate cuts and weighed on global stock markets.

Gold fell for a fourth straight session Wednesday as the oil rally strengthened expectations that interest rates will stay high.

Fuel prices have also become a political issue in the United States ahead of the November midterm elections. President Donald Trump has said he wants gasoline prices lower.

What's next

Traders will watch Wednesday's government inventory report, further developments in the Strait of Hormuz and any signs of progress in diplomatic talks. Analysts say that unless shipping through the strait returns to normal, oil prices are likely to stay well above levels seen before the war.