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Brent oil prices jumped more than $3 a barrel on Monday, initially spooked by Israel's launch of renewed strikes on Lebanon a day earlier, but also gaining further steam after sounds of explosions were heard in Iran.
Sounds of blasts were heard - in Tehran, Tabriz and Isfahan, local media reported early on Monday, eroding hopes for an imminent end to the wider war and a restart to crude flows through the Strait of Hormuz.
Brent crude futures rose $3.20 or 3.39% to $96.24 a barrel while US crude futures were up $2.87 or 3.17% at $93.41 per barrel as of 0333 GMT.
Those gains erased Friday's losses, when prices fell on hopes of a de-escalation in the US-Iran conflict, which has seen oil prices rise over 50% since March.
Though Iran on Sunday fired a salvo of missiles at Israeli targets in retaliation, US President Donald Trump insisted that an agreement to end the wider war remains well within reach.
Trump also reportedly told Israeli Prime Minister Benjamin Netanyahu to refrain from further attacks.
"It’s not going to have any impact on the deal," Trump told the Financial Times. "I call the shots. I call all the shots. He doesn’t call the shots."
Iran has made a ceasefire with Lebanon a condition for a peace deal with Washington.
Israel invaded Lebanon in March after Iran-backed Hezbollah fired rockets and drones across the border. Lebanon and Israel said on June 3 that they had agreed to a ceasefire following negotiations in Washington.
The two countries had previously agreed to a cessation of hostilities in April but violence continued.
The wider war has been stalemated since the US and Israel paused their attacks on Iran in early April, with Tehran blocking most shipping through the Strait of Hormuz, the main transit route for one-fifth of the world's oil. Washington has imposed its own blockade of Iranian ports.
Amid the resulting supply crisis, OPEC+ on Sunday agreed its fourth increase in oil output in four months. But analysts said the decision would have little impact since most OPEC+ members could not meet their output targets because of the Hormuz closure or, in the case of Russia, infrastructure attacks that have eroded its production capacity.
"In the current market, the physical impact of such a decision would be close to zero," Rystad Energy's head of geopolitical analysis, Jorge Leon, said in a note to clients.
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