Brent crude oil prices rose about 2 percent on Tuesday as fresh U.S. military operations in southern Iran and uncertain diplomatic signals from Washington heightened fears of supply disruptions and undermined already fragile peace expectations in the Middle East.
International benchmark Brent crude traded at US$98.26 a barrel in Asian markets, while U.S. West Texas Intermediate (WTI) futures for July were quoted at US$91.73. The WTI contract had no official settlement on Monday due to the U.S. Memorial Day holiday.
The rally reflected renewed risk premium being priced into global energy markets after the U.S. military said it had carried out what it described as “self-defense strikes” in southern Iran. According to the U.S. Central Command, the operations targeted vessels allegedly attempting to deploy naval mines and struck missile launch sites believed to pose an imminent threat to U.S. forces operating in the region.
The strikes mark another escalation in a rapidly deteriorating security environment in the Gulf, where concerns over shipping lanes particularly the Strait of Hormuz have become a central focus for traders. Roughly a fifth of global oil supply passes through the narrow waterway, making it one of the world’s most strategically sensitive energy chokepoints.
Tensions have been further compounded by mixed diplomatic messaging from Washington. U.S. President Donald Trump said in a social media post on Monday that he had encouraged several regional powers including Saudi Arabia, Qatar, Pakistan, Turkey, Egypt and Jordan—to join the Abraham Accords, the U.S.-brokered framework aimed at normalising relations between Arab states and Israel.
More Read
At the same time, Trump said negotiations with Iran were “proceeding nicely,” while warning that the United States could resume military action if talks collapsed. “It will only be a Great Deal for all or, no Deal at all,” he wrote, underscoring the volatility surrounding the diplomatic track.
Analysts say the combination of military activity and uncertain negotiations is reinforcing a risk premium in oil markets that had already been building due to supply concerns.
Swiss investment bank UBS said the global oil market was showing “mounting signs of strain,” citing declining inventories and ongoing disruptions to shipping routes. The bank estimated that global oil stocks fell by about 246 million barrels across March and April, a sharp drawdown that reflects both strong demand and constrained supply flows.
More Read
UBS added that cumulative production losses could exceed 1 billion barrels by the end of May if current disruptions persist, pointing to a market that remains structurally undersupplied despite efforts by some producers to stabilise output.
The bank also noted a divergence in inventory trends, with on-land crude and refined product stocks falling even as oil stored on tankers has risen. That shift, it said, reflects rerouted shipments—particularly increased U.S. exports to Asia—as traders attempt to bypass vulnerable shipping corridors.
Market participants say the latest developments are likely to keep crude prices volatile in the near term, as geopolitical risk continues to outweigh broader macroeconomic concerns such as demand uncertainty in major consuming economies.
Energy analysts warn that any further escalation in the Iran conflict could push prices higher, especially if it affects maritime traffic through the Strait of Hormuz or prompts retaliatory actions against regional energy infrastructure.
At the same time, some traders remain cautious about chasing prices higher, pointing to the possibility that diplomatic efforts could still reduce tensions if negotiations between Tehran and Washington progress.
For now, however, oil markets remain firmly driven by geopolitical risk, with investors closely watching both military developments and diplomatic signals for signs of either escalation or de-escalation in the region.
