Oil prices fell on Monday due to a stronger dollar and investors' concerns over the possibility of a faster-than-expected interest rate hike by the U.S. Federal Reserve.

 

Brent crude oil fell $2.19, or 2.5%, to $85.70 a barrel. West Texas Intermediate (WTI) was down $2.59, or 3%, to $82.56 a barrel.

 

The dollar rose to a two-week high Monday against a basket of currencies, helped by tensions between Russia and the West over Ukraine and the possibility of a more hawkish stance by the Federal Reserve this week.

 

Brent rose more than $1 earlier in the session on concerns over tight supplies and heightened geopolitical risks in Europe and the Middle East.

 

Further escalation in both Ukraine and the Middle East "justifies a risk premium to the oil price, as the countries involved - Russia and the UAE - are important members of OPEC+," said Commerzbank analyst Carsten Fritsch.

 

Tensions in Ukraine have been rising for months after Russia concentrated troops near its borders, heightening fears of supply disruptions in Eastern Europe.

 

In the Middle East, the United Arab Emirates on Monday intercepted and destroyed two Husit ballistic missiles aimed at the Persian Gulf nation after a deadly attack a week earlier.

 

Meanwhile, Barclays raised its average oil price forecast by $5 a barrel for this year, citing declining spare capacity and heightened geopolitical risks.

 

The bank raised its 2022 average price forecast to $85 and $82 a barrel for Brent and WTI, respectively.

 

Both benchmarks rose for the fifth straight week last week, adding about 2% and reaching their highest level since October 2014.

 

Oil prices have risen more than 10% this year because of concerns about supply cuts, and OPEC+ is currently struggling to meet a target monthly production increase of 400,000 barrels per day.