Oil is surging as traders brace for the UK's response to Iran's seizure of a British-flagged oil tanker

A British-flagged oil tanker Stena Impero which was seized by the Iran's Revolutionary Guard on Friday is photographed in the Iranian port of Bandar Abbas, Saturday, July 20, 2019. The chairman of Britain's House of Commons Foreign Affairs Committee says military action to free the oil tanker seized by Iran would not be a good choice. Tom Tugendhat said Saturday it would be A British-flagged oil tanker Stena Impero which was seized by the Iran's Revolutionary Guard on Friday is photographed in the Iranian port of Bandar Abbas, Saturday, July 20, 2019. The chairman of Britain's House of Commons Foreign Affairs Committee says military action to free the oil tanker seized by Iran would not be a good choice. Tom Tugendhat said Saturday it would be &quotextremely unwise" to seek a military solution to the escalating crisis, especially because the vessel has apparently been taken to a well-protected port. (Tasnim News Agency/via AP)Associated Press

  • Oil prices surged on Monday as traders braced for potential supply disruptions following Iran's seizure of a British-flagged oil tanker last week.
  • West Texas Intermediate and Brent crude prices rose more than 2% after Iran seized the Steno Impero and signaled it wouldn't let go of the vessel until the UK released an Iranian-flagged ship it seized earlier this month.
  • Prime Minister Theresa May is chairing a meeting of the UK government's Cobra emergency committee, and Foreign Secretary Jeremy Hunt could announce a freeze on Iranian assets later today.
  • Watch oil trade live.

Oil prices surged on Monday as traders braced for potential supply disruptions following Iran's seizure of a British-flagged oil tanker last week.

The Iranian Revolutionary Guard captured the Steno Impero in the Strait of Hormuz on Friday. Tehran has signaled it won't let go of the vessel until the UK releases an Iranian-flagged ship it seized near Gibraltar earlier this month. Prime Minister Theresa May will chair a meeting of Cobra, the UK government's emergency committee, to discuss potential responses. Foreign Secretary Jeremy Hunt could announce a freeze on Iranian assets later today, according to The Telegraph.

West Texas Intermediate crude climbed 2.1% to $56.80, while Brent crude jumped 2.2% to $63.80. However, oil prices remained comfortably below their highs earlier this month, suggesting investors don't expect further escalation or anticipate trade disputes will temper demand, said Hussein Sayed, chief market strategist at FXTM.

"While fundamentals do support lower oil prices, investors need to carefully watch the developments in Strait of Hormuz," he wrote in a morning note. "After all, the Strait is responsible for one-fifth of the world's oil supply, and any disruption will lead to a significant spike in prices."

The latest dispute comes after the US tightened sanctions on Iran following its withdrawal from a nuclear deal struck in 2015, and accused the Middle-Eastern nation of attacking tankers in May. The US also said it shot down an Iranian drone in the Gulf last week.

"We hope for their sake they don't do anything foolish," President Donald Trump told reporters on Friday. "If they do, they will pay a price like nobody's ever paid a price."

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