Oil prices rose more than $3 a barrel on Monday after Iran and the U.S. traded strikes and Israel ordered troops to move further into Lebanon in its battle with the Tehran-backed Hezbollah militant group.

Brent futures were up $3.43 or 3.8% at $94.55 a barrel at 1314 GMT. U.S. crude futures rose $3.87 or 4.4% to $91.23 a barrel. Over May, Brent and WTI lost around 19% and 17%, respectively. It was both contracts’ biggest monthly fall in absolute terms since March 2020 when the COVID-19 pandemic slashed energy demand.

Global equities held steady near record highs on Monday as the AI boom continued to drive demand. [MKTS/GLOB] Oil often trades in tandem with other risk assets such as equities.

The fighting in the Middle East, after Washington hosted Israel-Lebanon peace talks on Friday, dimmed hopes that the U.S. and Iran could soon announce an extension to their ceasefire.

U.S. President Donald Trump said on Friday he would soon decide on a proposed deal to extend a ceasefire announced in early April.

Israel would be key to any such deal, and Iran has said repeatedly that Hezbollah and Lebanon must be included. The U.S. has proposed a “gradual de-escalation” plan, a U.S. official said on Sunday.

Concerns are rising about mines in the Strait of Hormuz, a key oil and gas shipping lane, IG analyst Tony Sycamore said in a note. “Even if an agreement is reached, it won’t deliver a flood of supply,” Sycamore said.

An Axios reporter said on X on Friday that Iran had dropped more mines in the strait earlier last week.

Iran’s Foreign Ministry spokesperson Esmaeil Baghaei said on Monday the delay in the diplomatic process to end the war can be explained by a lack of trust, Washington’s contradictory positions and Israel’s attacks on Lebanon.

Concerns over supply outweighed weekend economic data from China which showed stalling factory activity. This added to concerns the world’s second-largest economy is losing momentum.

Saudi Arabia is likely to cut its official selling prices (OSPs) for crude oil to Asia in July for a second month, a Reuters survey showed.

Goldman Sachs said on Sunday that weak oil demand in China and Europe poses a major downside risk to its fourth-quarter Brent crude forecast of $90 a barrel and WTI forecast of $83, although Middle East supply disruptions could still push prices higher.

(Additional reporting by Colleen Howe and Sam Li; Editing by Jamie Freed, Emelia Sithole-Matarise and Susan Fenton)