Iran shoots down 2 US drones as Gulf tensions push oil 3% higher

Iran's Islamic Revolutionary Guard Corps shot down two US-made Lucas drones over Bandar Abbas port and Larestan in Fars Province on Monday, the latest escalation in a conflict that has pushed Brent crude above $90 a barrel and disrupted shipping through the Strait of Hormuz.

"The downing of these drones demonstrates our readiness to defend Iranian airspace against any aggression," the IRGC said in a statement carried by state television, without providing evidence of the intercepts. The US military did not immediately confirm the loss of the drones.

Brent crude rose more than 3 percent to $91.40 a barrel in Asian trading Monday, extending gains after Iran announced the closure of the Strait of Hormuz over the weekend. The waterway handles about one-fifth of global oil and liquefied natural gas shipments, according to the US Energy Information Administration. Gold gained 0.8 percent to $2,418 an ounce as investors rotated into safe-haven assets, while the US dollar index edged up 0.3 percent.

The drone shootdown marks the second consecutive day of direct military engagement between the two countries. Over the weekend, the US military said it struck about 140 Iranian targets across three nights of operations, including air defense systems, coastal radar sites, missile capabilities and naval assets. Iran's Revolutionary Guards responded by claiming attacks on US military facilities in Bahrain, Kuwait, Oman and Jordan, though Washington has not confirmed damage to its installations.

Strait of Hormuz Becomes the Flashpoint

The strategic waterway has emerged as the central battleground of the conflict. Iran said Saturday it had closed the strait to commercial traffic and reiterated Monday that passage would remain suspended until "stability and calm" returned. Tehran proposed a joint traffic management mechanism with Oman, but Foreign Ministry spokesperson Esmaeil Baghaei accused the United States of pressuring Muscat to block the discussions.

The United States rejected Iran's claim of control over the waterway, saying about 20 vessels had been escorted through the strait in the previous 24 hours. Ship-tracking data, however, showed limited commercial traffic, suggesting most tanker operators are avoiding the route. The last time the strait faced a sustained disruption threat was in 2019, when Iran seized several tankers following the US withdrawal from the nuclear deal, sending Brent above $75 a barrel over a three-month period.

Oil Markets Price in Prolonged Disruption

The escalation has injected a fresh risk premium into crude markets already grappling with tight supply. Brent's options skew has shifted sharply, with out-of-the-money call options for August delivery trading at a 12-point premium over puts — the widest since the Russia-Ukraine conflict in 2022 — signaling traders are hedging against a spike above $100.

President Donald Trump struck a defiant tone over the weekend, telling reporters "we're beating them up" and declaring the interim ceasefire effectively over, though he left the door open for further negotiations. The administration has also proposed charging a 20 percent toll on ships transiting the Strait of Hormuz, a plan the United Nations said has no legal basis.

For investors, the key question is duration. If the strait remains closed for more than two weeks, Goldman Sachs analysts estimate Brent could reach $105 a barrel, adding as much as 0.5 percentage points to US headline inflation and complicating the Federal Reserve's rate path ahead of its September meeting. If de-escalation follows within days, the risk premium could unwind rapidly, with Brent potentially falling back below $85.

This article is for informational purposes only and does not constitute investment advice.