Oil prices extended gains on Tuesday as renewed fighting between the US and Iran resurrected fears of supply disruptions from the Middle East. Brent crude futures were up $0.56, or 0.6%, to $91.05 a barrel at 0044 GMT, while U.S. West Texas Intermediate crude rose by $0.83, or 1%, to $86.59. This follows Brent's 2.7% close higher in the previous session, reaching its highest level since August.
The escalation in tensions was triggered by the first direct exchange of attacks between the two countries in a month. On Sunday, U.S. forces targeted Iranian rocket launchers on Larak Island, leading to Iran's retaliation on Monday against two American bases in Jordan. President Donald Trump has threatened further strikes against Iran, signaling a readiness to respond to attacks. Tim Waterer, chief market analyst at KCM, noted that these events bring the potential for Iranian retaliation back into play, raising prospects of damage to energy infrastructure around the Gulf and adding uncertainty for shipping through the Strait of Hormuz.
Further exacerbating supply concerns, a tanker reported being struck by three projectiles while sailing out of the Strait of Hormuz on Tuesday, as reported by the United Kingdom Maritime Trade Operations (UKMTO). No casualties or environmental impact were reported. The Strait of Hormuz, a crucial choke point that carried about one-fifth of global oil supplies before the conflict, was shut by Iran on February 28 after attacks by the U.S. and Israel. Efforts by mediators to reopen the strait have not yet succeeded. Analysts polled by Reuters in August anticipate oil prices to remain above $80 a barrel in 2026 due to ongoing shipping disruptions.
Shipping traffic in the Strait of Hormuz remains heavily constrained. Over the weekend, the number of visible commodity vessels transiting the strait dropped to five per day, according to Kpler data, significantly below the pre-conflict average of around 130 daily transits. U.S. Strategic Petroleum Reserve inventories also declined by approximately 3.1 million barrels last week, leaving stockpiles at 286.6 million barrels. Overall, the market is grappling with a "no war, no peace" situation that could last into 2027, according to Saul Kavonic, head of energy research at MST Financial, with only partial volumes flowing through the strait.
