Oil prices rise as U.S. launches operation to restore freedom of navigation in Strait of Hormuz

Oil prices rose Monday as the U.S. military launched an operation to restore freedom of navigation through the Strait of Hormuz.

International benchmark Brent crude futures rose about 4% to $112.69 per barrel by 11:09 a.m. ET. U.S. West Texas Intermediate futures advanced nearly 2% to $103.74 per barrel.

President Donald Trump on Sunday said the U.S. would guide civilian ships through the strait. The 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. would intervene in the strait, with an Axios reported 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 has threatened to 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.

The operation comes after at least two 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.

Brent oil

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.