Oil prices climbed significantly on Tuesday as tensions in the Middle East escalated with new US strikes against Iran and Iranian attacks on US forces. Brent crude futures, the international benchmark, rose by 4.5% to $94.52 a barrel, while US West Texas Intermediate futures increased by about 5% to $90.03 per barrel, reaching levels not seen since July 24. This surge is largely attributed to the first direct US strike on the Iranian mainland in over a month, which analysts view as an attempt to break a deadlock rather than a broader shift in strategy. The conflict, now in its seventh month, has consistently disrupted global energy supplies and sent shockwaves through financial markets.
The latest price hikes reflect renewed concerns that the US strikes could trigger another sustained round of fighting, further restricting the already limited flow of energy supplies through the Strait of Hormuz. Around one-fifth of global oil and liquefied natural gas shipments normally pass through this strait. Traffic has been severely disrupted by attacks on commercial vessels, with Monday's transits holding at about five ships a day, significantly below the daily average of about 14 vessels recorded over the previous 10 days. The war had previously pushed oil prices to around $115 a barrel in early May, compared to about $70 before the conflict began.
The volatility in oil prices has been ongoing since a 60-day ceasefire between the US and Iran expired in mid-August. Brent crude, which had peaked at nearly $94.40 a barrel on August 21, has since been trading in the range of $86-$91. Experts believe that hopes of a near-term deal to open the Strait of Hormuz have faded, with Saul Kavonic, head of energy research at MST Financial, noting that the oil market is increasingly realizing a "protracted 'no war, no peace' situation" could last well into 2027. This suggests that only partial volumes of oil will flow through the strait, maintaining upward pressure on prices.
