Oil prices rose sharply on Tuesday after top exporter Saudi Arabia said explosive-laden drones launched by a Yemeni armed movement aligned to Iran had attacked facilities belonging to state oil company Aramco.
Brent crude futures were at $71.15 a barrel at 1155 GMT, up 92 cents or 1.31%.
U.S. West Texas Intermediate (WTI) crude futures were at $61.68 per barrel, up 64 cents or 1.05%.
The Saudi state news agency quoted Energy Minister Khalid al-Falih as saying that Aramco had halted pumping on the East-West pipeline until the damage was evaluated, but that production and exports were continuing without disruption.
“These attacks prove again that it is important for us to face terrorist entities, including the Houthi militias in Yemen that are backed by Iran,” Falih said, calling the attack an “act of terrorism” that targeted the world’s global oil supply.
Saudi Arabia said earlier that two of its oil tankers were among those attacked off the coast of the United Arab Emirates on Sunday, incidents which ratcheted up tensions in the world’s top oil exporting region.
A U.S. official said Iran was the likely culprit, but Iranian officials denied responsibility for the incident.
Yemen’s Houthi group, which has been at war with the kingdom for over four years, said it had launched drone attacks on Saudi installations, without identifying the targets or time of the attacks.
Tehran has been embroiled in an escalating war of words with the United States over stricter U.S. sanctions, which have cut its oil exports and tightened global supply.
A fifth of global oil consumption passes through the Strait of Hormuz from Middle East crude producers to global markets.
“With rising tensions between Iran and the U.S., and with significant naval build-up in the region, markets are sensitive to news and can be tipped by the smallest signs of a conflict,” said Mihir Kapadia, CEO of Sun Global Investments.
The market was also holding out some hope for flagging U.S.-China trade talks as both sides expressed positive sentiments which may signal that the negotiations are not yet dead.
The negotiations between the United States and China appeared headed towards success last week but have largely unraveled over U.S. accusations that Beijing sought vast, last-minute changes.
China on Monday ignored a warning from U.S. President Donald Trump and moved to impose higher tariffs on a range of U.S. goods including frozen vegetables and liquefied natural gas.
“Price volatility is set to remain the theme in oil market over the coming sessions as ongoing trade spat between the United States and China ratchets up,” said Abhishek Kumar, head of analytics at Interfax Energy in London.