Oil prices climbed to their strongest levels in a month on Tuesday as renewed military tensions between the United States and Iran heightened concerns over global energy supplies and shipping through the Strait of Hormuz.
Brent crude rose $2.74, or 3.29%, to $86.04 per barrel by 07:51 GMT, while US West Texas Intermediate (WTI) gained $2.21, or 2.83%, to trade at $80.35 a barrel.
The move pushed Brent to its highest level since 12 June and WTI to its strongest level since 16 June, despite the memorandum of understanding signed by Washington and Tehran on 17 June to ease hostilities.
Geopolitical Risks Drive the Oil Rally
“Despite signing the memorandum of understanding and having a deal, this did not last for even a few weeks. So that’s the concern the market is trying to price right now,” said ANZ analyst Soni Kumari.
“What we think is that the peak of the escalation is behind us, but there are upside risks to oil prices if these disruptions continue and that will keep prices in the $85-$90 range.”
Market sentiment deteriorated after President Donald Trump reinstated a naval blockade targeting Iranian shipping and proposed a 20% security fee for commercial vessels using the Strait of Hormuz.
The strategic waterway carries roughly one-fifth of global oil and liquefied natural gas exports, making any disruption a significant risk for global energy markets.
Tanker Attacks Add to Supply Concerns
According to the UAE Ministry of Defence, two Emirati oil tankers were struck by Iranian cruise missiles in Omani territorial waters, killing one Indian crew member and injuring eight others.
Shipping data also showed tanker traffic through the Strait of Hormuz has fallen to its lowest level in two months, adding to fears over supply chain disruptions.
Citi said the likelihood of Iran abandoning the memorandum of understanding before the US midterm elections has increased, a scenario that could keep oil prices elevated for longer.
However, Iranian Oil Minister Mohsen Paknejad said the country’s crude exports continue uninterrupted despite the recent removal of a temporary US sanctions waiver.
China Demand Remains a Headwind
Beyond geopolitical developments, investors are also monitoring demand trends.
China’s crude oil imports plunged 41.3% in June to their lowest level in nearly a decade as refinery activity slowed sharply amid weak domestic demand and tighter export restrictions on refined fuels.
Meanwhile, Yemen’s Houthi movement launched missiles toward Saudi Arabia, prompting fresh concerns over the security of oil infrastructure in the region.
“If the Houthis extend their attacks to Saudi’s crude products in the Red Sea, it could put (further) uncertainties on crude flows from the region,” said Simon Wong, portfolio manager at Gabelli Funds.
Leave a Reply