Oil Prices Rise as US-Iran Tensions Escalate and Houthis Declare Embargo

Oil prices rose Monday after President Donald Trump said Iran would pay for the deaths of three U.S. service members, and Houthi militants in Yemen declared a maritime embargo on Saudi Arabia.

Brent crude futures, the international benchmark, gained about 1.3% to close at $89.22 per barrel. U.S. West Texas Intermediate crude futures advanced 0.9% to settle at $83.23 per barrel. Prices have surged around 20% this month as fighting between the U.S. and Iran has sharply escalated.

"Every time Iran kills an American Soldier they will pay for that killing many times over!" Trump said in a post on Truth Social. "This directive has been passed on to Secretary of War, Pete Hegseth, Chairman of the Joint Chiefs of Staff, Daniel Caine, and every Leader in the Military."

Brent jumped nearly 4% overnight to break $90 per barrel, after the U.S. confirmed at least three service members have died during recent fighting with Iran. Prices eased when Iran's Foreign Ministry spokesman Esmail Baghaei said negotiations with the U.S. could be pursued based on Tehran's interests

Iran's Houthi allies in Yemen, meanwhile, declared a maritime embargo against Saudi Arabia on Monday. The embargo could exacerbate the oil supply disruption triggered by Iran's tanker attacks in Hormuz. The Houthis have repeatedly threatened to close the Bab el-Mandeb Strait, which connects the Red Sea to global markets.

The Saudis have diverted millions of barrels of oil per day through a pipeline to an export terminal on the Red Sea. Those exports have acted as a crucial relief valve for the global crude market during the U.S.-Iran war.

The U.S. has bombed Iran for nine consecutive nights in retaliation for repeated attacks on oil tankers transiting the Strait of Hormuz. Tehran is trying to force ships to transit the strait through its territorial waters. Its attacks have killed at least two seafarers and injured more than a dozen this month.

An oil products tanker off Oman's coast was struck by a projectile over the weekend causing a fire onboard, according to a Sunday incident report from the United Kingdom Maritime Trade Operations Centre. The crew safely abandoned the vessel and were retrieved by a tug boat, UKMTO said.

The International Maritime Organization, a United Nations agency, identified the tanker as the Kavomaleas, which was sailing under the flag of Malta.

Iran has responded to U.S. strikes by firing missiles at Washington's Middle East allies. Tehran attacked a power and desalination plant in Kuwait over the weekend for the second time in two days, the Kuwait Times reported. Kuwait is heavily dependent on such plants for drinking water.

Gasoline prices rose back to $4 per gallon Monday as U.S. crude oil has surged 18% this month, according to AAA. Prices at the pump were last at that level on June 17, when the U.S. and Iran signed an interim agreement intended to reopen the strait and stop the fighting.

Amrita Sen, founder and director of research at Energy Aspects, said a substantial slowdown in shipping traffic through the Strait of Hormuz and depleted global inventories could push oil prices to more than $100 per barrel.

"The market is still quite complacent despite the price increase we have seen," Sen told CNBC's "Access Middle East" on Monday.