Oil prices climb over 3% as U.S.-Iran talks at impasse, Israel expands Lebanon offensive

Oil climbed more than 3% on Monday as Israel ordered troops to advance deeper into Lebanon for renewed clashes with Iran-backed Hezbollah, while U.S.-Iran diplomatic talks remained stalled.

The escalation in Lebanon marks a widening of Israel's military operations against the militant group, adding supply-risk premium to crude markets already on edge over Middle East tensions. The impasse in U.S.-Iran negotiations removes a potential pathway to easing regional conflict that could threaten oil infrastructure or shipping lanes.

The move higher comes as traders weigh geopolitical risk against demand concerns. Israel's expanded offensive raises the possibility of broader regional involvement, particularly given Hezbollah's ties to Tehran. Any direct confrontation involving Iran—OPEC's third-largest producer—could disrupt global supply flows.

The stalled diplomatic track between Washington and Tehran eliminates near-term hope for de-escalation, keeping the conflict premium embedded in prices. Iran has previously threatened to close the Strait of Hormuz, through which roughly 20% of global oil passes, during periods of heightened tension.