Oil prices were volatile on Monday, after jumping 7% on Friday, as fresh attacks by Israel and Iran over the weekend raised concerns that fighting could spread across the region and significantly disrupt oil exports from the Middle East.

Brent crude futures rose 64 cents, or 0.86%, to $74.87 a barrel by 0507 GMT, while U.S. West Texas Intermediate crude rose 76 cents, or 1.04%, to $73.74. Oil prices had jumped more than $4 a barrel earlier in the session and also briefly dipped into negative territory.

Both benchmarks closed 7% higher on Friday, after jumping more than 13% during the session to their highest levels since January. Iranian missiles struck Tel Aviv, Israel, and the port city of Haifa on Monday, destroying homes and raising concerns among world leaders at this week's G7 meeting that fighting between the old foes could lead to a wider regional conflict.

Exchanges of fire between Israel and Iran on Sunday resulted in civilian casualties, with both militaries urging civilians on the opposing side to take precautions against further attacks.

The latest developments have raised concerns about disruptions in the Strait of Hormuz, a vital shipping lane. About a fifth of the world's total oil consumption, or about 18 to 19 million barrels per day (bpd) of oil, condensate and fuel, passes through the strait.

"Buying was driven by the ongoing Israel-Iran conflict, with no resolution in sight," said Toshitaka Tazawa, an analyst at Fujitomi Securities.

"But as seen last Friday, some of the selling came on concerns about overreaction," he said. While the market is watching for potential disruptions to Iranian oil production from Israeli attacks on energy facilities, growing concerns over a blockade of the Strait of Hormuz could push prices up sharply, Tazawa added.

Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), currently pumps about 3.3 million barrels of oil per day and exports more than 2 million barrels of oil and fuel per day.

The spare capacity of OPEC and its allies, including Russia, to pump more oil to offset any disruptions is roughly equivalent to Iran's production, according to analysts and OPEC watchers.

"If Iranian crude exports are disrupted, Chinese refiners, the sole buyers of Iranian crude, will need to look for alternative oil grades from other Middle Eastern countries and Russian crude," Richard Joswick, head of short-term oil analysis at S&P Global Commodity Insights, said in a note.

"This could also increase freight rates and tanker insurance premiums, narrowing Brent-Dubai spreads and hurting refinery margins, particularly in Asia," Joswick added.

US President Donald Trump said on Sunday he hoped Israel and Iran could broker a ceasefire, but added that sometimes countries have to fight first. Trump said the US would continue to support Israel but declined to say whether he had asked the US ally to halt its attacks on Iran.

German Chancellor Friedrich Merz said he hoped a meeting of Group of Seven leaders meeting in Canada on Sunday would reach a deal to help resolve the conflict and prevent it from escalating.

Meanwhile, Iran has told mediators Qatar and Oman that it is not open to negotiating a ceasefire while under Israeli attack, an official briefed on the communications told Reuters on Sunday. (alg)

Source: Reuters