SINGAPORE (BLOOMBERG) – Oil jumped 2 per cent to back above US$60 a barrel after reports of a missile strike on an Iranian tanker near the Saudi Arabian port city of Jeddah reignited fears over military escalation in the world’s most important crude-producing region.

Brent futures surged about US$1 a barrel after the Islamic Republic News Agency reported a National Iranian Oil Company tanker caught fire after a blast, taking the day’s gains to more than 2 per cent. Two missiles that hit the vessel probably came from the direction of Saudi Arabia, the national tanker company’s head of public relations said in a call with Iran’s Press TV.

The tanker explosion will spur fresh concern about potential conflict in the Middle East after attacks on ships and drones earlier this year and last month’s strike on Saudi Arabian energy infrastructure that briefly cut global supplies by 5 per cent. Prices were already higher on Friday (Oct 11) on prospects for progress in the US-China trade dispute, offering a glimmer of hope for demand.

“The explosion points to potential geopolitical risks and that has once again surprised the market to the upside,” said Will Sungchil Yun, a commodities analyst at HI Investment & Futures Corp in Seoul. “It still remains to be seen whether prices will keep rising as investors are putting their focus on the trade talks and the gains won’t last long if the negotiations result in a no-deal.”

Brent crude for December settlement rose as much as US$1.36, or 2.3 per cent, to US$60.46 a barrel on the London-based ICE Futures Europe Exchange. The contract is up 3.2 per cent this week and traded at US$60.22 a barrel at 8:35am in London.

West Texas Intermediate for November jumped as much as US$1.19, or 2.2 per cent, to US$54.74 a barrel on the New York Mercantile Exchange. The contract climbed 96 cents to US$53.55 on Thursday, the highest level in more than a week. Prices are up 3.1 per cent this week.

The strike ratchets up tension in the Middle East after the attacks on key Saudi Arabian oil-processing facilities on Sept 14 that were blamed on Iran. In July, a US ship down an Iranian drone, while tankers have been targeted in the Persian Gulf.