Oil prices advanced to their highest levels in four weeks on Tuesday after renewed hostilities between the United States and Iran increased concerns over the security of energy shipments through the Strait of Hormuz.
Brent crude futures gained $2.74, or 3.29%, to $86.04 a barrel by 07:51 GMT, while US West Texas Intermediate (WTI) crude rose $2.21, or 2.83%, to $80.35 per barrel.
Brent reached its highest level since 12 June, while WTI climbed to its strongest price since 16 June. The United States and Iran had signed a memorandum of understanding aimed at ending the conflict on 17 June.
Markets Reassess Geopolitical Risks
“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.”
Tensions escalated again this week after US President Donald Trump reinstated a naval blockade targeting Iranian shipping and proposed introducing a 20% fee to protect commercial traffic moving through the Strait of Hormuz.
The strategic waterway is one of the world’s most important energy corridors, carrying around 20% of global daily oil and liquefied natural gas exports before the latest conflict intensified.
Shipping Disruptions Increase Market Anxiety
The United Arab Emirates Ministry of Defence said two UAE oil tankers were struck by Iranian cruise missiles in Omani waters within the southern shipping lane of the Strait of Hormuz. The attack killed one Indian crew member and left eight others injured.
Shipping data also indicated that tanker traffic through the Strait of Hormuz declined to its lowest level in two months.
Citi said in a research note that the possibility of Iran abandoning the memorandum of understanding before the US midterm elections has increased, a scenario that could result in oil prices remaining elevated for an extended period.
Despite the geopolitical tensions, Iranian Oil Minister Mohsen Paknejad said on his official Telegram account that the country’s oil exports continue to operate normally, even after the recent cancellation of a 60-day waiver on US oil sanctions.
Regional Risks Continue to Support Oil
Elsewhere in the region, Yemen’s Houthi movement launched missiles towards Saudi Arabia after accusing the kingdom of bombing an airport under Houthi control.
“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.
Separately, China’s crude oil imports fell 41.3% in June to their lowest level in almost a decade. Refinery processing activity dropped to a 10-year low as weaker domestic demand and restrictions on refined fuel exports weighed on crude purchases amid the conflict involving Iran.