Oil prices jump after Iran attacks UAE as U.S. tries to open Strait of Hormuz

Oil prices jumped Monday after Iran attacked the United Arab Emirates, jeopardizing a fragile ceasefire agreement between Tehran and Washington.

International benchmark Brent crude futures rose more than 5% to $114.23 per barrel by 1:08 p.m. ET. U.S. West Texas Intermediate futures advanced more than 3% to $105.46 per barrel.

The UAE's Defense Ministry said in a social media post that Iran had launched four cruise missiles at the country. Three of the missiles were successfully engaged by the UAE's air defenses over its territorial waters, the ministry said. The fourth missile fell into the sea, it said.

A fire broke out at the UAE's oil hub at Fujairah after a drone attack by Iran, according to a report from Reuters.

The attack on the UAE is the latest escalation in the Persian Gulf. The U.S. and Iran were teetering on the brink of war again after a weekslong standoff over the Strait of Hormuz.

U.S. Hormuz mission

President Donald Trump on Sunday said the U.S. would guide civilian ships through the strait. Iran has blockaded the sea lane for weeks now, triggering the biggest oil supply disruption in history.

The U.S. military operation, dubbed Project Freedom, is supported by U.S. guided-missile destroyers, more than 100 aircraft and unmanned platforms, U.S. Central Command said Monday. But there was confusion about how aggressively the U.S. military would intervene in the strait, with an Axios report indicating that the operation is limited.

U.S. officials told Axios that there are no plans for full-fledged naval escorts right now. Instead, the U.S. Navy will advise ships on how to avoid mines and stands ready to intervene if vessels are attacked, according to the Axios report. A U.S. official told Axios that the military has been authorized to strike immediate threats to ships crossing the strait.

Iran's military warned Monday that it would attack any U.S. warship that approaches the strait, according to state news agency Tasnim. The U.S. military denied Iranian media reports that the Revolutionary Guard hit a U.S. warship with two missiles.

"No U.S. Navy ships have been struck," CENTCOM said in a social media post. "U.S. forces are supporting Project Freedom and enforcing the naval blockade on Iranian ports."

Two U.S. flagged merchant vessels have successfully transited the strait, CENTCOM said Monday.

More ships attacked

The operation comes after several attacks commercial ships were attacked in or near the strait over the weekend. A tanker was a hit by projectiles north of Fujairah in the United Arab Emirates and a bulk carrier was attacked by several small craft off the coast of Iran, according to incident reports from the United Kingdom Maritime Trade Operations Centre.

The United Arab Emirates on Monday said Iranian drones targeted a vessel affiliated with its state oil company ADNOC. It condemned Iran's attacks on commercial ships as "acts of piracy."

Traders will also be assessing OPEC+ agreeing to an oil output increase of 188,000 barrels per day, in the cartel's first meeting since the exit of its key member, the United Arab Emirates.

Exxon Mobil CEO Darren Woods said Friday that the market has not fully absorbed the impact of Iran's blockade of the strait. He warned that even higher oil prices are likely on the way.

"It's obvious to most that if you look at the unprecedented disruption in the world supply of oil and natural gas, the market hasn't seen the full impact of that yet," Woods told investors on Exxon's first-quarter earnings call.

"There's more to come if the strait remains closed," the CEO said.