Hong Kong: Oil prices surged more than two percent on Friday after an Iranian tanker was hit by suspected missile strikes in Saudi Arabia, sparking fresh supply concerns in the already-tense Gulf region.
The National Iranian Tanker Company, which owns the ship, said the hull of the Sabiti suffered two separate explosions off the Saudi coast, adding they were "probably caused by missile strikes".
The news sent Brent surging 2.3 per cent to USD 60.46 at one point, while West Texas Intermediate jumped 2.1 per cent to USD 54.69.
Both later eased back but investors remain on edge as the explosions come just weeks after two of Saudi Arabia's biggest oil installations were hit in blasts that briefly wiped out five percent of global production, causing a record rise in prices.
They will also revive concerns about the security of the world's crude supplies as tensions in the tinderbox Gulf are already high, with Riyadh and the United States accusing Iran of being behind last month's attacks.
"The explosion points to potential geopolitical risks and that has once again surprised the market to the upside," Will Sungchil Yun, a commodities analyst at HI Investment & Futures Corp., told Bloomberg News.
"It still remains to be seen whether prices will keep rising as investors are putting their focus on (China-US) trade talks and the gains won't last long if the negotiations result in a no-deal."
Crude had already been rising on signs of progress in the China-US trade talks and after OPEC Secretary-General Mohammad Barkindo said the grouping of the world's giant producers would do what it could to avert another slump.
Asian equities were also enjoying strong buying thanks to hopes of progress in the China-US trade talks, with Donald Trump saying they were "going very well".
Negotiators from the world's top two economies kicked off much-anticipated talks on resolving their long-running tariffs row on a positive footing, easing worries that they might be cut short.
Without elaborating, Trump told reporters: "I will say I think it's going really well. We had a very, very good negotiation with China." Adding to the positive vibes was news that Trump would meet China's top trade envoy Liu He at the White House.
The developments allowed dealers to breathe a sigh of relief as tensions between the two sides appeared to be growing after the US put new restrictions on Chinese firms over human rights abuses and reports Beijing had narrowed the issues it was willing to discuss.
"The fog of trade war is beginning to lift, giving way to an air of trade optimism sweeping through global capital markets," said Stephen Innes, Asia-Pacific market strategist at AxiTrader.
"Investors are starting to believe there is light at the end of the... tunnel as hope springs eternal."
Hong Kong led gains across Asia, jumping more than two percent, while Tokyo added more than one percent, and Shanghai and Sydney each put on 0.9 per cent.
Singapore and Seoul both gained 0.8 per cent, with healthy gains also recorded in Wellington, Manila, Mumbai and Jakarta.
In early trade London fell 0.2 per cent but Paris rose 0.3 per cent and Frankfurt put on 0.9 per cent.
Talks are expected to resume on Friday with hopes they can at least lead to a delay in tariffs, due next week, being imposed on China.
"The prospect of US-China trade truce that results in the suspension of further planned tariffs increases is rightly welcome news," Rodrigo Catril at National Australia Bank said.
"But as it is often the case, the devil will be in the detail," he warned, adding that if the optimism is to last "a meaningful de-escalation in tensions is required".
Markets are also getting some support from rare signs of progress in the Brexit saga after British Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar said they could see a route towards striking a possible divorce deal.
After hours of talks regarding the vexed question of Northern Ireland, the two issued a joint statement that said: "Both continue to believe a deal is in everybody's interest. They agreed that they could see a pathway to a possible deal."
While Varadkar said there were still hurdles to overcome, the news did provide some much-needed hope in the crisis after German Chancellor Angela Merkel was reported to have said Brexit talks were "close to breaking down".
The pound surged two percent against the dollar on Thursday and also rallied on the euro, and in early Asian trade managed to hold its ground.
"The process has dragged on, and there have been a few bumps along the way, but yesterday's message was one of the more upbeat updates," said David Madden, market analyst at CMC Markets