Oil prices approached $100 a barrel on Monday as traders warned of a renewed supply crunch. Hostilities between the US and Iran escalated after US strikes on three Iranian crude oil tankers in retaliation for missile attacks on US Navy warships. An attack on Saudi Aramco facilities in Jizan further heightened concerns.

Analysts warn that shipping disruptions and dwindling reserves could drive prices higher. Daan Struyven of Goldman Sachs warned Brent could reach $120 if attacks intensify. Commodity funds are turning bullish as global reserves outside China have fallen by more than 400 million barrels since the conflict began.

Oil in tankers at sea is at multiyear lows. China has re-entered the market, switching to Iraqi and Saudi crude. Wholesale diesel in the US has traded above $100 a barrel above crude prices, a historic spread.

Martijn Rats at Morgan Stanley noted diesel is twice the price of crude, signaling a crunch point. Refining capacity in the Gulf and Russia has been disrupted by attacks. Prices will likely continue to move higher as demand must match reduced supply.