Oil prices surged to a one-month high due to ongoing US-Iran clashes affecting the Strait of Hormuz, a vital oil shipping lane. Brent crude rose nearly 4% amid fears of prolonged disruption in the region.
The conflict follows recent US strikes on Iran and retaliatory attacks by Iran on oil tankers and US military assets. This escalation has sharply reduced shipping traffic through the strait, intensifying market concerns.
Oil prices have surged to their highest level in a month as renewed hostilities between the United States and Iran continued for a third consecutive day, dampening hopes for a return to normality in the Strait of Hormuz.
Related coverage: US strikes on Iran trigger rise in oil prices and fall in global stocks amid Hormuz tensions.
Brent crude, the primary international benchmark, rose as much as 3.8 percent on Tuesday, extending a 9.6 percent gain from the previous day.
Brent futures for September delivery stood at $85.92 a barrel as of 08:00 GMT, the highest since June 15.
After easing to pre-conflict levels following Washington and Tehran’s signing of a memorandum of understanding (MoU) for peace last month, Brent has risen 19 percent from its price before the start of the US-Israel war on Iran in late February.
The US Central Command on Monday announced strikes on Iran for a third day, saying its forces targeted Tehran’s ability to attack “innocent civilians and commercial shipping” in the Strait of Hormuz.
Iran’s Islamic Revolutionary Guard Corps said it hit two oil supertankers in the strait and launched missile and drone strikes against US military assets in Kuwait and Bahrain in retaliation for the attacks.
Adding to the market volatility, President Donald Trump said on Monday the US would reimpose its blockade of Iranian ports and begin charging vessels transit fees as the “guardian” of the critical waterway.
“Crude oil is fast losing its strategic petroleum reserve buffer, and a violent repricing up cannot be discounted until the market sees toned-down rhetoric from both parties,” June Goh, a senior oil market analyst at Sparta Commodities in Singapore, told Al Jazeera, referring to the US government’s emergency oil stockpile, which the Trump administration has drawn on to mitigate supply constraints.
After ticking up in recent weeks amid hopes for a permanent peace deal between Washington and Tehran, traffic in the Strait of Hormuz has plummeted amid the renewed threat of violence against commercial shipping.
A total of 57 transits were recorded from Friday through Sunday, a more than 50 percent drop compared with the previous week, according to ship-tracking platform MarineTraffic.
Roughly 130 vessels transited the strait daily before the US and Israel launched their initial strikes on Iran in late February.
“Traffic through Hormuz is grinding to a halt, back to – or even below – our immediate pre-MoU pace,” Rory Johnston, founder of oil market research firm Commodity Context, told Al Jazeera.
“The oil market has proven extremely patient through this crisis, in large part thanks to an ample stock cushion upon which we were able to draw to blunt the sharpness of the supply shock,” Johnston said.
“Unfortunately, much of that cushion has now been depleted, leaving us much more vulnerable to a rerun of March and April.”
The Trump administration has sought to assure markets that the strait remains open to shipping, despite Iran’s declaration on Sunday that the waterway is closed “until further notice”.
The US Department of Energy said on Monday that 8.5 million barrels of oil passed through the strait the previous day with military assistance, describing the flow as “consistent with the recent average”.
“The US military will ensure oil flows continue, with or without the Iranians, to keep markets well supplied,” the department said in a statement.
Bart Melek, global head of commodity strategy at TD Securities in Toronto, Canada, said oil prices are likely to rise again substantially amid the resumption of US-Iran hostilities.
“I suspect that a move to $100 is quite possible, should it become apparent that physical shortage risks are real and increasingly likely,” Melek told Al Jazeera.
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