Global oil prices rose nearly 3% on Tuesday, reaching their highest level in four weeks as the United States and Iran intensified military activity in the Strait of Hormuz. The escalation has raised concerns about possible disruptions to energy supplies through one of the world’s most important oil transit routes.

Oil Prices Extend Their Strong Rally

As of 06:30 GMT, Brent crude futures were up $1.90, or 2.3%, at $85.20 per barrel. U.S. West Texas Intermediate crude rose $1.91, or 2.4%, to $80.05 per barrel.

Both contracts had gained more than $2 per barrel earlier in the session before giving back part of their advances.

In the previous session, Brent surged 9.6%, marking its largest daily gain since May 2020. Oil prices are now trading at their highest levels since the United States and Iran signed a memorandum of understanding aimed at ending the conflict on June 17.

Supply Risks Increase in the Strait of Hormuz

The main driver behind the rally was the United States’ decision to reinstate its blockade on Iranian shipping while conducting a third consecutive night of strikes against Iran.

U.S. President Donald Trump also proposed charging a 20% fee for protecting vessels passing through the Strait of Hormuz.

According to Tim Waterer, Chief Market Analyst at KCM Trade, the renewed U.S. blockade and Iran’s response have added a fresh geopolitical risk premium to oil prices.

Although the Strait of Hormuz has not been fully closed, the conflicting objectives of both sides have made the outlook for oil transportation and regional supply increasingly uncertain.

Shipping data showed that the number of oil tankers passing through the Strait of Hormuz fell to its lowest level in two months during the latest reporting period.

Attacks Add to Market Concerns

Amid the escalating conflict, two United Arab Emirates oil tankers were struck by Iranian cruise missiles in Omani territorial waters. According to the UAE Ministry of Defence, one Indian crew member was killed and eight others were injured.

In a separate development, Yemen’s Houthi movement fired missiles at Saudi Arabia after accusing the kingdom of bombing an airport under Houthi control.

If the attacks expand to Saudi oil facilities or shipping routes in the Red Sea, uncertainty surrounding regional oil flows could increase further.

What Will Determine the Next Move in Oil Prices?

The most important factor to monitor is the actual movement of crude oil through the Strait of Hormuz.

If tanker traffic continues to decline, exports are disrupted, or the shipping route faces a meaningful blockade, oil prices could enter another leg higher.

Conversely, if crude continues to flow despite the military escalation, part of the current geopolitical risk premium could gradually fade.

The market is also awaiting the latest U.S. oil inventory data. A preliminary survey suggests that U.S. crude stockpiles may have declined last week, while gasoline and distillate inventories likely increased.

Conclusion

Oil prices are receiving strong support from escalating U.S.–Iran tensions and the growing risk of disruptions in the Strait of Hormuz.

However, the next direction will depend largely on whether the conflict causes an actual interruption to crude oil flows or merely increases uncertainty and risk aversion across the market.

Investors should continue monitoring tanker traffic through the Strait of Hormuz, regional oil exports, and further military developments involving the countries concerned.

Source: Reuters