Oil Prices Climb 3% on Demand Boost, Middle East Tensions

Development in Europe boosted positive signals as the European Union (EU) said the 27-nation bloc is under no pressure to accept an unfair tariff deal with the US.

The European Commission, meanwhile, proposed adding more individuals and over 100 vessels linked to Russia’s shadow fleet to its 17th package of sanctions against Moscow in response to Russia’s 2022 invasion of Ukraine.

Demand signals may also be tied to expectations that European companies will record growth when first quarter numbers are released.

The rise in geopolitical risk premium in the Middle East also provided support after Israel struck Iran-backed Houthi targets in Yemen as a retaliation for an assault on an airport.

US President Donald Trump, however, said the US will stop bombing the Houthis in Yemen, saying that the group had agreed to stop interrupting important shipping lanes in the Middle East.

Prices also drew support after consumers in China increased spending during the May Day celebration and as market participants returned after the five-day holiday.

The US Dollar fell to a one-week low against a basket of currencies as investors grew impatient about trade deals.

A weaker US currency makes dollar-priced oil less expensive for buyers using other currencies.

In addition, lower oil prices in recent weeks have prompted some US energy firms to announce that they would cut some rigs, which analysts said should over time increase prices by reducing output.

President Trump also said on Monday he would announce pharma tariffs over the next two weeks, his latest action on levies that have impacted global financial markets over the past months.

US Treasury Secretary Scott Bessent said the Trump administration could announce trade agreements with some of the US largest trade partners as early as this week, but gave no details on which countries were involved.