LONDON, May 4 (Agencies): Oil prices pared earlier gains on Monday after the US military said two US Navy guided-missile destroyers had entered the Gulf to break an Iranian blockade and that two US ships had transited the Strait of Hormuz.
Iran earlier said it had prevented a US warship from entering the Gulf.
Brent crude futures were up $2.05, or 1.9 per cent, at $110.22 a barrel by 1307 GMT, having hit a session high of $114.30. US West Texas Intermediate was up 47 cents, or 0.5 per cent, at $102.41 a barrel, after rising to as high as $107.46 earlier on Monday.
Prices spiked after Iranian news agency Fars reported on Monday, citing local sources, that Tehran had struck a US warship intending to pass through the strait and forced it to turn back. US Central Command denied any US Navy ships had been struck on Monday.
"The path for prices remains skewed to the upside as long as flows through the strait remain restricted," UBS analyst Giovanni Staunovo said.
President Donald Trump said the US would begin efforts to assist ships stranded in the strait, but prices stayed above $100 a barrel, with no peace deal in sight and shipping through the strategic waterway still constrained.
Iran's military warned US forces on Monday not to enter the strait, saying it would "respond harshly" to any threat.
Trump has made securing a nuclear deal with Tehran a priority, but Iran wants to defer nuclear talks until after the war and first lift rival blockades on Gulf shipping.
Meanwhile, the United Arab Emirates on Monday accused Iran of attacking an empty crude oil tanker belonging to the Abu Dhabi state oil firm ADNOC with drones as it attempted to pass through the strait.
On Sunday, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, said it would raise oil output targets by 188,000 barrels per day in June for seven members, marking the third consecutive monthly increase.
The rise matches the one agreed for May, minus the share of the UAE, which left OPEC on May 1. However, the additional barrels are expected to remain largely confined to paper as long as the war continues to disrupt Gulf oil supplies.
Meanwhile, Treasury Secretary Scott Bessent said Monday that the US mission to restore maritime traffic through the Strait of Hormuz can help alleviate an ongoing oil shortage, adding that "help is on the way" for consumers.
After a US-Israeli military campaign targeting Iran that began on February 28, Tehran's forces effectively closed the strait, a key route for oil and gas transit.
Global oil prices have since surged, as have costs at US gasoline pumps, squeezing American households as key midterm elections approach.
Meanwhile, Washington is maintaining a blockade of Iranian ports.
"They (Iran) are trying to cut off international freedom of navigation through the Strait of Hormuz, and the US is opening that up," Bessent told Fox News in an interview on Monday.
"We have blockaded the ships going into or out of Iranian ports. Their economy is in freefall," he added. "Their soldiers will not have a high tolerance for not getting paid."
But the economic fallout has been widespread globally.
In the United States, the average cost of a gallon of regular gasoline was $4.46 as of Monday morning, according to the AAA motor club. This is a sharp rise from the $2.98 level seen on February 26 before the war.
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