Oil prices surged more than 1 percent on Monday after a drone attack targeted a nuclear power facility in the United Arab Emirates, intensifying fears of wider instability in the Middle East and raising concerns over potential disruptions to global energy supplies.
The latest escalation came as diplomatic efforts to end the conflict involving the United States, Israel and Iran appeared to falter, adding fresh uncertainty to already volatile energy markets.
Benchmark Brent crude rose by US$1.36, or 1.24 percent, to trade at US$110.62 a barrel in Asian trading, while US West Texas Intermediate (WTI) crude climbed US$1.84, or 1.75 percent, to US$107.26 a barrel.
Traders reacted sharply to reports that a nuclear power plant in the United Arab Emirates had come under drone attack, sparking fears that critical infrastructure across the Gulf region could increasingly become targets as tensions deepen.
The incident added to mounting concerns over the security of oil production and shipping routes in one of the world’s most important energy-exporting regions.
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Market analysts said investors were pricing in the risk of broader regional conflict that could threaten crude exports from Gulf producers and disrupt traffic through strategic waterways such as the Strait of Hormuz.
The attack comes against the backdrop of a worsening confrontation involving Iran, Israel and the United States, with no immediate signs of de-escalation.
Diplomatic efforts aimed at securing a ceasefire or reducing hostilities appeared to have stalled over the weekend, according to reports from Washington and regional capitals.
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US President Donald Trump was also expected to meet senior advisers to discuss possible military options regarding Iran, further fuelling investor anxiety over the potential for a wider conflict.
Analysts said oil markets remain highly sensitive to developments in the Middle East, which accounts for a significant share of global crude production and exports.
“The market is reacting to the growing perception that the conflict could spread beyond current battle lines and directly impact energy infrastructure,” one Singapore-based commodities analyst said.
The Gulf region is home to several major oil producers, including Saudi Arabia, the UAE, Iraq and Kuwait, and any threat to supply routes or production facilities can quickly push prices higher.
Investors are particularly focused on whether hostilities could disrupt shipments through the Strait of Hormuz, a narrow maritime passage through which roughly one-fifth of global oil consumption passes each day.
Energy traders also warned that prolonged geopolitical instability could tighten global crude supplies at a time when demand remains relatively strong in major economies.
Higher oil prices could add to inflationary pressures worldwide, complicating efforts by central banks to stabilise prices and support economic growth.
In recent months, oil markets had already been under pressure from concerns about supply constraints, production cuts by major exporters and geopolitical tensions in several regions.
The latest gains extended a broader rally in crude prices as investors increasingly sought safe-haven assets amid growing uncertainty over the security situation in the Middle East.
Financial markets across Asia were also closely watching developments, with investors assessing the potential economic fallout from any further escalation.
While no immediate disruption to UAE oil exports was reported following the drone strike, analysts cautioned that markets were likely to remain volatile as long as geopolitical risks persisted.
The UAE, a key member of the Organization of the Petroleum Exporting Countries, has invested heavily in protecting its energy infrastructure in recent years amid repeated regional security threats.
Nevertheless, the latest attack underscored the vulnerability of critical facilities in the Gulf and the growing risks facing global energy markets as tensions in the region intensify.
