Oil prices climb after reports of Saudi Aramco refinery being hit by Houthi rebels

By Nora Redmond

This screen grab made on Saturday from undated handout video footage released by the U.S. Central Command shows what it says is one of the Iranian oil carriers it struck.

Oil prices climbed in volatile trading Monday after reports of Saudi Aramco infrastructure being hit by Houthi rebels in Saudi Arabia, close to the Yemen border.

The West Texas Intermediate contract for October delivery (CL.1) (CLV26) advanced 1.2% to $92.68 a barrel late Monday, having briefly touched $93 earlier in the day. Brent crude's contract for November delivery (BRN00) (BRNX26) rose to $97.38.

The moves took both the U.S. benchmark and the international benchmark to their highest levels since July 23. Average U.S. gas prices, at $4.14 a gallon, shattered the Labor Day weekend record of $3.82 and are about $1 more than they were last year, the Associated Press reported, citing AAA data.

The rise in oil prices pushed U.S. stock-index futures down from early Monday highs. Dow Jones Industrial Average futures (YM00) were down more than 300 points, or 0.6%, as of 11 p.m. Eastern on Monday, while S&P 500 futures (ES00) edged lower and Nasdaq-100 futures (NQ00) inched higher.

Treasury futures (TY00) also dipped on concerns that higher energy costs would bolster inflationary pressures. The U.S. cash equity and bond markets were closed Monday for Labor Day.

The Financial Times reported that Saudi Aramco's Jazan refinery, which stands close to Saudi Arabia's border with Yemen, was struck by the country's Iran-backed Houthi rebels on Monday. Two people familiar with the situation told the newspaper that the damage is currently being evaluated.

The group has previously attacked the same infrastructure, most recently in August, which caused some delays to oil production.

The attack on the Saudi facilities come after Mohsen Rezaei, the new secretary of Iran's Supreme National Security Council, on Sunday said the country was planning to unveil an "exclusion zone" to prevent ships from entering the Strait of Hormuz, the maritime route through which 20% of global crude supplies previously flowed.

He said it would be announced in the days ahead and will "begin from the line of the U.S. naval blockade, extend toward the Strait of Hormuz, and from this side continue into the Persian Gulf," with ships facing sanctions if breached.

The U.S. and Iran continued to exchange military strikes, bringing the renewed round of hostilities into a second week.

On Sunday, Tehran claimed to have hit an unmanned U.S. military vessel in the Strait of Hormuz, but Capt. Tim Hawkins, a Central Command spokesperson, called this a "total lie."

It came after Centcom announced that on Saturday it struck three oil tankers, including one near Kharg Island, which is responsible for about 90% of the Iran's oil exports. Earlier that day, Iran's Islamic Revolutionary Guard Corps said it targeted two U.S. Navy warships with ballistic missiles.

Iranian Parliament speaker Mohammad Bagher Ghalibaf told state media on Sunday that the U.S. must understand the "rules of the game have changed." He also warned of "a faster, heavier, and more painful response" to U.S. strikes.

Also over the weekend, members of the Organization of the Petroleum Exporting Countries and allies agreed to keep oil production unchanged in October from September after increasing output for six months in a row.

"The main focus in the Iran conflict over the weekend was a tit-for-tat escalation targeting commercial shipping in and around the Gulf," Jim Reid, of Deutsche Bank, wrote in a Monday note.

"We remain a distance from a resolution," he added.

- Mike Murphy contributed to this report.

-Nora Redmond

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09-07-26 2309ET