Oil markets extended strong gains in Asian trade on Tuesday, building on a near 10% advance from the prior session as tensions between the United States and Iran escalated. At 20:56 ET (00:53 GMT), Brent futures for September delivery were up 2.1% at $85.01 per barrel, while West Texas Intermediate crude rose 2.1% to $79.78 per barrel.
Both benchmarks surged almost 10% in the previous trading session to reach one-month highs, marking their largest single-day percentage increases in months. This wave of buying followed a decision by the U.S. administration to reinstate a naval blockade on Iran amid renewed military exchanges between Washington and Tehran.
The U.S. President also announced that Washington would impose a 20% charge on cargo transiting the Strait of Hormuz, with the stated purpose of covering security costs. According to U.S. military statements, enforcement of the blockade was set to begin on Tuesday, with the stated aim of targeting vessel traffic linked to Iran while allowing neutral commercial shipping to continue through the waterway.
Recent hostilities in the region include Iranian drone strikes on U.S. assets in Kuwait and an Iranian cruise missile strike on a vessel in the Strait of Hormuz. The United Arab Emirates reported that two of its tankers were attacked in Omani waters. The spate of attacks and the stepped-up U.S. response followed exchanges of missile and drone strikes over the weekend, which effectively ended a fragile arrangement reached last month that had been intended to reduce tensions around the Strait of Hormuz.
Market participants remain wary that further escalation or retaliatory measures could interfere with oil shipments from the Gulf, a chokepoint through which roughly a fifth of global oil consumption moves. The jump in crude prices has reverberated through broader financial markets, putting downward pressure on equities and raising concerns about inflation as investors reassess the potential effects of higher energy costs on global growth and central bank policy.
Context and immediate market reaction
Traders pushed prices higher as the prospect of disrupted flows through the Strait of Hormuz appeared to rise. The reinstated naval blockade, the new transit charge, and the series of attacks cited by regional authorities combined to tighten risk calculations across energy and financial markets.
Outlook
With enforcement reportedly commencing on Tuesday and the region experiencing successive military engagements, market sensitivity to further developments in the Gulf is likely to remain elevated. Investors are monitoring whether additional incidents will directly impede tanker movements or further influence energy and equity market dynamics.