Oil prices climbed on Tuesday as a resumption of direct exchanges between the United States and Iran reintroduced the possibility of supply disturbances from the globe's most important crude-producing region.
Brent crude futures rose 56 cents, or 0.6%, to $91.05 a barrel at 00:44 GMT. U.S. West Texas Intermediate crude increased by 83 cents, or 1%, to $86.59. Both benchmarks had posted notable gains in the previous session, with Brent finishing up 2.7% and WTI up 2.8% after reaching their highest levels since late August during the prior day.
The uptick followed a threat from U.S. President Donald Trump of additional strikes against Iran after the first direct exchange of attacks between the two countries in a month on Sunday. The escalation marks a shift from the conflict's recent phase, which had largely taken the form of an economic standoff.
Market watchers say the renewed kinetic risk draws back into focus the chance of damage to Gulf energy infrastructure and an added element of uncertainty for tanker traffic through the Strait of Hormuz. "These bring the potential for Iranian retaliation back into the equation. That in turn raises the prospect of damage to energy infrastructure around the Gulf and adds fresh uncertainty for shipping through the Strait of Hormuz. Both of those risks are being reflected in the firmer tone in crude prices," said Tim Waterer, chief market analyst at KCM.
Supporting the view that shipping activity remains constrained, Kpler data showed that visible commodity vessels transiting the Strait of Hormuz declined over the weekend to about five per day. Attempts by mediators including Qatar and Oman to negotiate a reopening of the Strait of Hormuz - which had carried roughly one-fifth of global oil flows before the waterway was closed in late February - have so far not produced an agreement.
Highlighting the persistent hazards to shipping and supplies, the United Kingdom Maritime Trade Operations agency reported on Tuesday that a tanker said it was struck by three projectiles while sailing out of the Strait of Hormuz. The UKMTO added that there were no casualties and no environmental impact reported from the incident.
On a parallel diplomatic and commercial front, President Trump announced last Friday an agreement with Venezuela to manage oil reserves in that country, a move he said would assist in replenishing the U.S. Strategic Petroleum Reserve, which remains near a 44-year low. Sources close to preparations indicated that U.S. oil major Chevron and GE Vernova, India’s ONGC, Italy’s Eni and Colombia’s GeoPark are on course to sign final agreements in Venezuela after months of negotiations to solidify energy projects in the OPEC member state, five sources close to the preparations said on Monday.
Meanwhile, U.S. government data showed a drawdown in the Strategic Petroleum Reserve of about 3.1 million barrels last week, taking holdings to 286.6 million barrels.
Summary
Renewed U.S.-Iran hostilities and a reported projectile strike on a tanker transiting the Strait of Hormuz have pushed crude futures higher amid concerns about potential damage to Gulf energy assets and shipping routes. Reduced visible tanker traffic through the strait and diplomatic efforts to reopen it remain in focus, while a U.S.-Venezuela oil arrangement and SPR drawdowns shape the broader supply picture.
Key points
- Brent rose to $91.05 a barrel and U.S. WTI to $86.59 as markets priced in renewed Middle East risk.
- Visible commodity vessel transits through the Strait of Hormuz fell to about five per day, according to Kpler shipping data.
- Major energy companies including Chevron, GE Vernova, ONGC, Eni and GeoPark are reportedly on track to finalize agreements in Venezuela after months of negotiation, according to sources close to the preparations.
Risks and uncertainties
- Potential for damage to energy infrastructure around the Gulf, which could reduce crude output or complicate exports - affecting the oil and shipping sectors.
- Ongoing uncertainty for shipping through the Strait of Hormuz, where a tanker reported being struck by three projectiles - a risk to maritime transport and insurance costs.
- Strategic supply dynamics remain fluid as the U.S. Strategic Petroleum Reserve continues to be drawn down - a consideration for energy markets and downstream industries sensitive to crude prices.
Markets will likely continue to react as developments in the Gulf and progress on commercial agreements in Venezuela unfold. For now, the combination of geopolitical tension, constrained shipping activity and adjustments in U.S. reserve levels underpins the recent firming in crude prices.