Crude prices climbed again on Tuesday, building on the previous session’s sharp rally as intensifying Middle East tensions and mounting threats to shipping through the Strait of Hormuz reinforced concerns about potential supply disruptions.
At 03:25 ET (08:25 GMT), May Brent futures gained 3.7% to $80.58 per barrel, while U.S. West Texas Intermediate (WTI) crude rose 3.5% to $73.72 per barrel.
Both benchmarks had already finished Monday more than 7% higher after surging as much as 13% to reach their highest levels in a year.
Hormuz closure threats keep oil bid
The Middle East has entered one of its most turbulent periods in recent years following the coordinated U.S.-Israeli strike over the weekend that killed Iran’s Supreme Leader Ayatollah Ali Khamenei.
Market nerves intensified after Tehran warned it could shut down the Strait of Hormuz entirely — a strategic corridor responsible for roughly one-fifth of global seaborne oil flows.
Iranian officials said they would strike any vessel attempting to pass through the strait, raising the likelihood of disruptions to exports from key Gulf producers such as Saudi Arabia, Iraq and the United Arab Emirates.
The latest leg higher in oil prices reflects fears that an extended standoff between the U.S., Israel and Iran could destabilize the wider Gulf region and potentially involve additional parties, threatening both output and export routes.
“While there are concerns about oil flows through the Strait of Hormuz, a greater risk to the market would be Iran targeting additional energy infrastructure in the region. This could lead to more prolonged outages,” ING analysts wrote in a research note.
“While a full, long-term closure of the Strait remains an extreme scenario, even partial disruption to tanker traffic tightens market balances and could push crude prices materially higher if sustained,” said Laurence Booth, Global Head of Markets, CMC Markets. “Continued military escalation and elevated risk premia in energy markets are likely to dominate price action until there is clearer evidence of de-escalation or alternative supply routes emerge.”
Brent seen above $100 in worst-case outcome – OCBC
In a severe scenario involving a sustained blockade of the Strait of Hormuz, Brent could climb past $100 per barrel, analysts at OCBC Bank said Tuesday, as mounting Middle East tensions unsettle energy markets.
Brent briefly traded near $82 per barrel on Monday amid reported shipping disruptions.
OCBC cautioned that a prolonged shutdown of the strait could drive prices into triple-digit territory. However, its central scenario does not foresee an extended blockade, pointing to OPEC’s spare capacity as a cushion that could help offset lasting supply losses.
U.S. signals steps to curb energy cost pressures
Despite the sharp price swings, traders appear to have already factored in a sizeable geopolitical risk premium ahead of the strikes and are currently pricing in only temporary interruptions to flows through Hormuz — disruptions that the anticipated global supply surplus this year may be able to absorb.
U.S. Secretary of State Marco Rubio said Washington would unveil measures on Tuesday aimed at easing elevated energy costs, suggesting efforts to blunt the economic impact.
Even so, oil markets remain highly sensitive to further developments, and volatility is expected to remain elevated as investors continue to assess shifting geopolitical risks.
Leave a Reply