Oil prices jumped on Monday to their highest since January as Washington's weekend move to join Israel in striking Iran's nuclear facilities stoked supply concerns.

Brent crude futures were up $1.88, or 2.44%, at $78.89 a barrel by 1122 GMT. U.S. West Texas Intermediate crude was up $1.87, or 2.53%, at $75.71.

Both contracts jumped more than 3% earlier in the session to $81.40 and $78.40, respectively, their highest in five months, before giving up some of the gains.

The price surge came after U.S. President Donald Trump said he had "destroyed" Iran's main nuclear site in an attack over the weekend, joining Israeli strikes in an escalating Middle East conflict as Tehran vows to defend itself.

Iran is OPEC's third-largest crude producer. Market participants expect further price gains amid growing concerns that Iranian retaliation could include closing the Strait of Hormuz, through which about a fifth of global crude oil supplies pass.

Iran's Press TV reported that Iran's parliament approved a measure to close the strait. Iran has previously threatened to close the strait but never followed through.

"The risk of damage to oil infrastructure … has multiplied," said Sparta Commodities senior analyst June Goh.

While there are alternative pipeline routes out of the region, there will still be volumes of crude that cannot be fully exported if the Strait of Hormuz becomes inaccessible. Shippers will increasingly shy away from the region, he added.

Brent has risen 13% since the conflict began on June 13, while WTI has gained about 10%.

The current geopolitical risk premium is unlikely to last long without significant supply disruptions, analysts said.

Meanwhile, the unwinding of some long positions accumulated following the recent rally in prices could limit oil's upside, Ole Hansen, head of commodity strategy at Saxo Bank, wrote in a market commentary on Sunday. (alg)

Source: Reuters