Oil prices rallied on Monday, a day after President Donald Trump said Iran's response to a US proposal was "unacceptable," raising supply fears as the Strait of Hormuz stayed largely closed, which kept the global market tight.
Brent crude futures climbed $4.16 or 4.11% to $105.45 a barrel at 0340 GMT. US West Texas Intermediate was at $99.80 a barrel, up $4.38, or 4.59%.
Last week, both contracts recorded 6% weekly losses on hopes for an imminent end to the 10-week-old conflict that would allow oil transit through the Strait of Hormuz.
"The oil market continues to trade like a geopolitical headline machine, with prices swinging sharply based on every comment, rejection, or warning coming from Washington and Tehran," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Trump is scheduled to arrive in Beijing on Wednesday and is expected to discuss Iran among other topics with Chinese President Xi Jinping, according to US officials.
"Market attention now shifts squarely to President Trump’s visit to China this week," IG market analyst Tony Sycamore said in a note.
"There is hope he can persuade Beijing to leverage its influence over Iran to push for a comprehensive ceasefire and a resolution to the ongoing disruption in the Strait of Hormuz."
The world has lost about 1 billion barrels of oil over the past two months and energy markets will take time to stabilise even if flows resume, Saudi Aramco CEO Amin Nasser said on Sunday.
Another two tankers carrying crude exited the Strait of Hormuz last week with trackers switched off to avoid Iranian attacks, Kpler shipping data showed, underscoring a rising trend to sustain Middle East oil exports.
"Even if the acute oil shock fades by late 2026, the ongoing risk of renewed disruption in the Strait of Hormuz, depleted inventories and weaker policy coordination is expected to keep a geopolitical risk premium embedded in prices," ING analysts wrote in a note on Monday.
They expected Brent to remain above $90 per barrel through 2026 and around $80 to $85 per barrel into 2027 as demand growth resumes and inventories are gradually rebuilt.
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