Crude prices pushed sharply higher on Tuesday, extending the previous session’s strong advance as escalating Middle East tensions and mounting threats to shipping through the Strait of Hormuz reinforced fears of supply disruptions.
At 03:25 ET (08:25 GMT), May Brent futures climbed 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 settled more than 7% higher on Monday after surging as much as 13% to reach one-year peaks.
Fears over Hormuz closure drive gains
The region has entered one of its most unstable phases in years following the weekend’s coordinated U.S.-Israeli strike that killed Iran’s Supreme Leader Ayatollah Ali Khamenei.
Market anxiety escalated after Tehran threatened to completely shut the Strait of Hormuz, a strategic maritime passage that accounts for around 20% of global seaborne oil shipments.
Iranian officials pledged to target any vessel attempting to transit the strait, raising the risk of interruptions to crude exports from major Gulf producers such as Saudi Arabia, Iraq and the United Arab Emirates.
Oil’s rally has been fueled by concerns that a drawn-out confrontation involving the U.S., Israel and Iran could unsettle the broader Gulf region and potentially pull in other parties, placing additional pressure on production facilities and export infrastructure.
“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 said in a 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 could exceed $100 in worst-case scenario – OCBC
In a more severe scenario involving an extended blockade of the Strait of Hormuz, Brent prices could spike above $100 per barrel, analysts at OCBC Bank said in a research note on Tuesday, as escalating tensions in the Middle East shake energy markets.
Brent briefly touched around $82 per barrel on Monday amid shipping disruptions.
OCBC cautioned that a sustained shutdown of the strait could propel prices into triple-digit territory. However, the bank’s base-case outlook does not anticipate a prolonged blockade, pointing to OPEC’s spare production capacity as a buffer that could help limit lasting supply damage.
U.S. signals measures to ease energy costs
Despite the sharp moves, markets appear to have already factored in a significant geopolitical risk premium ahead of the strikes and seem to be pricing in only temporary disruptions to Hormuz flows — disruptions that this year’s projected supply surplus may be able to offset.
U.S. Secretary of State Marco Rubio said Washington would unveil measures on Tuesday aimed at alleviating higher energy costs, suggesting efforts to soften the economic impact.
Nonetheless, crude markets remain highly reactive to unfolding developments, and volatility is likely to persist as traders assess evolving geopolitical risks.