Oil prices climb as Iran deploys new tactics to target ships transiting Hormuz

By Yuka Obayashi and Emily Chow

TOKYO, Oct 14 (Reuters) - Oil prices climbed on Wednesday after two vessels were struck in the Strait of Hormuz and Iranian officials told Reuters they were deploying new tactics to target ships, as Tehran seeks to keep oil prices high and influence the US midterm elections.

Brent crude futures rose 63 cents, or 0.6%, to $106.32 a barrel by 0345 GMT, while US West Texas Intermediate crude futures gained 66 cents, or 0.7%, to $94.80 a barrel. Both contracts rose more than $1 in earlier trade before paring some gains.

The Iranian officials declined to provide details of the new strategy, but one said that Iran had started using different offensive tactics against vessels it considered in violation of its restrictions about 10 days ago, adding that this had led to an increase in attacks on such ships.

A container ship and a tanker were hit by unknown projectiles within the Strait of Hormuz, the United Kingdom Maritime Trade Operations said on Tuesday.

"The fact that Iranian officials are openly admitting to undermining US efforts to keep oil prices under control speaks volumes about the real intentions behind the so-called 'peace talks,'" said Priyanka Sachdeva, head of market insights at Phillip Nova.

"Iran is well aware of its geographical importance and the havoc higher oil prices can inflict on the global economy, and it may not shy away from using this leverage."

Elsewhere, the Iran-allied Houthis attacked an administrative building belonging to state-owned oil firm Saudi Aramco 2222.SE in the city of Dhahran, causing a limited fire, Saudi Arabia's energy ministry said on Wednesday.

The group has fired ballistic missiles and drones at Saudi Arabia over the past week in retaliation for the kingdom's support of Yemeni government forces. Riyadh's international airport has been hit four times, with a strike on Saturday killing 13 people.

"Supply concern stemming from conflict between the Houthis and Saudi Arabia is driving prices higher," said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, a unit of Nissan Securities.

"However, the expectation that increased Russian diesel exports will ease market tightness is likely to limit sharp price movement in either direction," Kikukawa said, projecting WTI to trade between $90 and $100 a barrel.

Last month, Saudi Arabia raised oil production despite disruptions to shipments caused by the US-Iran war. That led to a sharp production increase from OPEC+ — the Organization of the Petroleum Exporting Countries and partners including Russia — OPEC said on Tuesday.

In Russia, the government said on Tuesday it did not see any direct link between peace talks with Ukraine and its deal to export diesel to the US.

The comment came after Reuters reported that US envoys had told Ukrainian officials on Friday that the deal was part of an attempt to draw Russia back to negotiations for a peace settlement.