Oil prices rise as investors weigh US strikes on Iran

Summary Oil prices rose after US and Israeli strikes on Iran, with investors weighing the risks of supply disruptions as the conflict heightens tensions in the Middle East.

Oil prices rose on Monday in a volatile session after the United States' decision over the weekend to join Israel in striking Iran's nuclear facilities, as investors weighed the potential risks of oil supply disruptions as a result of the escalating conflict.

Brent crude futures were up 0.84% ​​at $77.70 a barrel by 0800 GMT. West Texas Intermediate crude was up about 1% at $74.50.

US President Donald Trump said he had "obliterated" Iran's key nuclear facilities in strikes over the weekend, joining an Israeli strike in an escalation of the Middle East conflict as Tehran vowed to defend itself.

Israel carried out new strikes against Iran on Monday, including on the capital Tehran and Iran's Fordow nuclear facility, which was also targeted by the US strike.

Iran is the third largest oil producer in OPEC.

Iran said on Monday that the US strike on its nuclear facilities expanded the range of legitimate targets for its military and called US President Donald Trump a "player" for joining Israel's military campaign against the Islamic Republic.

Meanwhile, China said the US strike had damaged Washington's credibility and warned the situation "could spiral out of control".

Prices were volatile in Monday's session. Both contracts hit fresh five-month highs earlier in the session of $81.40 and $78.40 respectively before giving back gains and turning negative during the European morning session, before recovering to gain 1%.

Prices have risen since the conflict began on June 13 amid growing fears that Iranian retaliation could include closing the Strait of Hormuz, through which about a fifth of global crude supplies pass.

Meanwhile, investors are assessing the extent of the geopolitical risk premium in oil markets as the Middle East crisis has yet to impact supply.

"The geopolitical risk premium is fading as there have been no supply disruptions so far. But as it is unclear how the conflict may evolve, market participants are likely to hold a risk premium for now. Therefore, prices are likely to remain volatile in the short term," said Giovanni Staunovo, an analyst at UBS.

The geopolitical risk premium includes fears that Iranian retaliation could include the closure of the Strait of Hormuz, through which about a fifth of the world's crude oil supply passes.