Oil prices rose more than 2% on Monday after the US struck an Iranian island in the Strait of Hormuz also prompting Iranian retaliation as the six-month-long conflict continued.
Brent crude rose $2.21 to $90.31 a barrel while US crude gained $1.83 to reach $85.23.
US forces hit two missile launchers on Iran's Larak Island on Sunday the first American strike on Iranian territory since late July. Iran responded by attacking two US air bases in Jordan according to Iranian media citing the Revolutionary Guards.
President Donald Trump claimed on social media that Iran's Kharg Island energy hub was "blown to smithereens" but there was no evidence of any attack there and the post included only an AI-generated video with no further proof.
Peace talks remain stalled as mediators try to reopen the Strait of Hormuz a route that once carried a fifth of the world's oil before the war began in February.
Analysts expect the conflict to stay contained rather than escalate sharply though each flare-up delays hopes of reopening the strait. DBS energy analyst Suvro Sarkar said oil prices will likely stay between $85 and $95 a barrel until there's more clarity on the situation.
Shipping through the strait has slowed sharply with only five vessels a day crossing over the weekend as companies grow wary of attacks. A tanker was reportedly hit by a projectile on Saturday.
The US Treasury said new sanctions on Iran are likely weekly going forward.
Despite Monday's jump the oil prices are set for a small monthly decline in August after last week's 4% drop. Trump also said oil from a new deal with Venezuela would help refill the US Strategic Petroleum Reserve currently near a 44-year low.
