Geopolitical tensions are broadening to start the trading week, on news that Iran’s military late Friday seized a British oil tanker near the Strait of Hormuz, apparently in response to the U.K. capturing an Iranian vessel a couple weeks ago. Iran’s standoff with the U.S. and the U.K. has been escalating recently, and is likely to continue in the coming weeks, with the concern in the marketplace that a major U.S. military strike against Iran could disrupt oil shipping in the Persian Gulf.

Oil prices rose more than 1% on Monday, as investors worried about possible supply disruptions in the energy-rich Middle East after Iran’s seizure of a British tanker last week. WTI crude is trading above $56 a barrel on the news.

“The latest ratcheting up of tensions in the Persian Gulf with the seizure of a U.K. oil tanker has only led to a nominal gain in [West Texas Intermediate crude] though, as would be expected, a firmer gain in Brent,” said Marshall Steeves, energy markets analyst at IHS Markit.

“So far, these events have not shut the Strait [of Hormuz]and the impact on oil exports has been muted,” he told MarketWatch. “If that changes and exports are significantly constrained, then a more substantial oil rally would be the result.”

Last week, WTI lost over 7% and Brent lost more than 6%, dragged down by economic worries and the return of U.S. production in the Gulf of Mexico after a hurricane.

“Some of the selling pressure from demand concerns seems to have evaporated this week,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. “The fears about geopolitics seem to have halted some of that selling pressure,” he said.

The U.S. has been measured in it’s reaction to Iran so far, despite threats from Iran on Monday that it had arrested 17 Iranian citizens on charges of spying for the United States and had already executed some of them, according to Iranian and Western news media.

“In the cat and mouse game that Iran is playing with the U.S., it is taking calculated risks,” Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.

“So far the U.S. is not taking the bait.”

President Trump, in a Twitter post, called the Iranian claim about the spies “totally false.”

“Zero truth. Just more lies and propaganda,” he tweeted, calling Iran “a Religious Regime that is Badly Failing and has no idea what to do.”

Oil traders betting on more price increases can look to exchange-traded funds (ETFs) like the United States 3x Oil (NYSEArca: USOU)ProShares UltraPro 3x Crude Oil ETF (NYSEArca: OILU) and the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares (NYSEArca: GUSH).

For more market trends, visit ETF Trends.

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