Oil rallies on Mideast tensions, stocks weighted by trade remark

HONG KONG — Oil prices rallied on Monday after Iran warned the presence of US forces in the Gulf was causing instability in the region, while equities were mixed as US President Donald Trump said he did not want a partial trade deal with China.

While a loosening of monetary policy by central banks is providing support to investors, they remain on edge following last week's attack on Saudi oil facilities that was claimed by Houthi rebels in Yemen but blamed by the US on Iran.

Iran's President Hassan Rouhani on Sunday hit out at a US move to increase troop numbers in Saudi Arabia, saying: "Foreign forces can cause problems and insecurity for our people and for our region."

He called on outside powers to "stay away" and added Tehran would present a peace plan to the United Nations within days.

Investors are concerned about a possible conflict in the oil-rich Middle East after last week's attacks — which hammered Saudi Arabia's biggest crude plant — though both sides have said they do not want a war.

The US has ramped up sanctions on Tehran, targeting its central bank.

Both main oil contracts saw prices rise more than 1 per cent on Monday and traders are keeping tabs on Riyadh's progress in repairing the facilities.

"You can never say never, but with an Iranian delegation apparently due to attend the UN session opening week in New York, it is hard to imagine too many fireworks in the gulf this week," said OANDA senior markets analyst Jeffrey Halley.