Oil prices rose nearly 3% on Tuesday to their highest in four weeks, as the U.S. reimposed its naval blockade of Iran while the two countries stepped up attacks in the Strait of Hormuz, heightening uncertainty about energy flows.
Brent crude futures were last up $1.90, or 2.3%, to $85.20 per barrel at 0630 GMT, while U.S. West Texas Intermediate crude rose $1.91, or 2.4%, to $80.05 a barrel.
Both contracts earlier rose more than $2 a barrel before paring some gains, while Brent had surged 9.6% in the previous session, its biggest daily gain since May 2020.
Oil prices are now at their highest since the two countries signed a memorandum of understanding to end the war on June 17.
The U.S. military carried out a third consecutive night of strikes against Iran on Monday, as U.S. President Donald Trump reinstated a blockade of Iranian shipping and proposed charging a 20% fee to guard the Strait of Hormuz.
“The latest escalation, including the U.S. reinstatement of the blockade and Iranian responses, has clearly injected fresh risk into the market,” KCM Trade chief market analyst Tim Waterer said.
“While a full closure hasn’t occurred, the competing objectives of both sides have made the supply picture highly uncertain,” he added.
Amid the strikes, two United Arab Emirates tankers were hit by two Iranian cruise missiles in the southern lane of the Strait of Hormuz in Omani territorial waters, the UAE Ministry of Defence said on Monday, killing one Indian crew member and wounding eight others.
Shipping data on Monday also showed the number of tankers transiting the Strait of Hormuz fell in the past day to the lowest level in two months.
“The key variable to monitor is the physical movement of crude through the Strait of Hormuz. Any meaningful blockage of tanker traffic, prolonged reduction in vessel movements, or disruption to export flows would likely trigger another leg higher in oil prices,” said Phillip Nova analyst Priyanka Sachdeva.
“Conversely, if barrels continue to move despite the military escalation, part of the current geopolitical premium could gradually fade.”