Oil Surges After Iran Strikes Energy Facility in UAE’s Fujairah – Yahoo Finance
(Bloomberg) — Oil prices jumped as critical energy infrastructure and tankers in the Middle East came under attack, marking a significant escalation in the US-Iran hostilities and jeopardizing a four-week-old ceasefire.
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Brent futures surged 5.8% to settle above $114 a barrel after an Iranian drone strike caused a fire in a key oil industrial zone in Fujairah. The UAE also issued several missile alerts to its residents and said its defense systems were actively engaging with threats.
Prices rallied earlier in the session as tankers linked to multiple nations reported coming under fire in the critical Strait of Hormuz.
The wave of attacks represent the most notable increase in tensions since the US and Iran agreed to a fragile ceasefire in early April. The global market loses millions of barrels of oil supplies for every day that the key shipping lane remains blocked, heightening fears of demand destruction and a global economic recession.
“The market is starting to face the reality that this won’t be a clean, linear path to reopening, but a much bumpier and more uncertain process,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group, adding that expectations for a restart to flows through the Hormuz have slipped from June to as far out as early July. “In the meantime, the biggest risk is the re-emergence of energy infrastructure as a target, particularly in the UAE.”
Fujairah is a major hub for both crude and fuels, and has taken on increased significance for both the UAE and global markets because of its position outside the Strait of Hormuz. However, on Monday, Iran redefined the “control zone” in the strait, stretching from south of Mount Mobarak in Iran to south of Fujairah, semi-official Tasnim reported.
At least 13 ships have already diverted from the area after the report that Iran had extended its maritime reach, threatening to worsen the global supply crunch.
The US has imposed a naval blockade of Iranian ports since mid-April. The blockade, a major sticking point in bringing Tehran to the negotiating table, is choking off Iranian crude exports — the only flows out of the Persian Gulf since the war began at the end of February.
Monday’s escalation came after US President Donald Trump announced plans by the US military to try and restore transit through the strategic waterway and help stranded vessels exit the Persian Gulf.
But several shipowners and a ship manager contacted by Bloomberg said more concrete details would be needed about the ability to again transit through Hormuz, as well as assurances around key concerns including mines and safety from Iranian attacks. They asked not to be named given the sensitivity of the issue.
“Not many believe that the Strait will reopen anytime soon,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management Ltd., adding that the US plan marks the first attempt to reopen the chokepoint by military means. “The market will closely monitor Iran’s response.”
US Central Command said that two American-flagged merchant vessels successfully navigated the strait, as part of a broader effort to open a lane through the vital waterway. Admiral Brad Cooper said Iran has tried to interfere with vessels in the area over the last 12 hours, and the US successfully repelled both drone and missile attacks.
Over the weekend, OPEC+ agreed to a symbolic rise in June quota levels, as the group sought to send a business-as-usual message after the exit of the United Arab Emirates. Abu Dhabi, meanwhile, touted its own growth plans.
–With assistance from Nathan Risser, Charles Gorrivan and Will Kubzansky.
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