Oil prices surged on Tuesday following renewed military confrontations between the United States and Iran and an attack on a tanker in the Strait of Hormuz. The UK Maritime Trade Operations agency reported that a tanker was hit by three unknown projectiles while transiting the southern shipping lane near the Omani coast on Monday. No casualties were reported in the incident. This attack comes after Iran launched an assault on two American bases in Jordan, retaliating for a US strike on Iranian rocket launchers on Larak Island, which reportedly killed three. These exchanges mark the first direct military strikes between the US and Iran in over a month, intensifying fears of escalation in the ongoing seven-month conflict.
Analysts believe the US strike on Larak Island aimed to address specific Iranian behavior rather than broadening the war. Ali Vaez from the International Crisis Group noted that targeting launchers, not wider infrastructure, suggests a focused punitive action. Jason Brodsky of United Against Nuclear Iran indicated that the Trump administration is seeking to further degrade Iran's capability to mine the Strait of Hormuz, employing economic coercive measures. US Treasury Secretary Scott Bessent commented that Iran's "lashing out kinetically" reflects the impact of new sanctions on its economy. Despite a recovery in oil flows through the Strait of Hormuz to approximately two-thirds of pre-war levels, the renewed hostilities have driven up oil prices.
The global energy markets reacted sharply to the escalating tensions. International oil benchmark Brent crude climbed past $90 a barrel, trading at $87.84 as of 7:02 a.m. ET on Tuesday, while US West Texas Intermediate futures increased by 2.43% to $87.84 per barrel. On Tuesday, Brent crude November delivery saw a 2% rise, topping $92 a barrel to reach $92.31 as of 08:45 GMT, extending a previous day's gain of over 2.5%. The volatility in oil prices has been pronounced since a 60-day ceasefire between the US and Iran expired in mid-August, dampening hopes for a return to normal maritime traffic in the Strait of Hormuz, a crucial conduit for about one-fifth of global oil supplies. Saul Kavonic, head of energy research at MST Financial, expressed concerns that the market is bracing for a "protracted 'no war, no peace' situation" that could last well into 2027.
The Strait of Hormuz continues to face heavy constraints on traffic, with many vessels operating with their Automatic Identification System (AIS) turned off to avoid Iranian threats and US Navy interceptions. From August 24 to August 30, the strait saw 107 transits, a decrease from 121 crossings the previous week. Although Tony Sycamore, a senior market analyst at IG Markets, suggests oil prices could ease if "dark" shipments increase, he predicts that the immediate path for oil prices is higher due to the recent skirmishes. However, he also noted that if the flare-up subsides by the weekend and illicit transfers resume, the current geopolitical premium could quickly diminish. This ongoing conflict has significantly disrupted Iran's trade, with non-oil exports and imports falling by nearly 30% and 25% respectively, and crude oil and condensate sales to China down by about 40% year-on-year.
