Oil prices rose about three percent on Tuesday, recovering some of the previous session’s losses as renewed supply concerns gripped markets amid the ongoing conflict involving Iran and its regional adversaries.
Brent crude futures climbed US$3.07, or 3.1 percent, to US$103.28 a barrel by 0734 GMT, while U.S. West Texas Intermediate (WTI) gained US$3.35, or 3.6 percent, to US$96.85. The rebound followed sharp declines on Monday, when Brent fell 2.8 percent and WTI dropped 5.3 percent after limited tanker movements briefly eased fears over supply disruptions.
Markets remain highly sensitive to developments around the Strait of Hormuz, a critical chokepoint through which roughly a fifth of global oil and liquefied natural gas flows. The passage has been largely disrupted by the conflict, now in its third week, raising concerns over shortages, rising energy costs and broader inflationary pressures.
Analysts warned that the situation remains fragile despite intermittent shipping activity.
“The risks remain stark: it only takes one Iranian militia to strike a tanker to escalate the crisis again,” said market analyst Tony Sycamore.
The standoff has also exposed divisions among Western allies. Calls by Donald Trump for partners to deploy naval escorts for commercial vessels transiting the strait were rejected by several countries, underscoring the lack of a coordinated response to the crisis. The U.S. president criticised allies for what he described as insufficient support despite longstanding security ties.
Market participants say the trajectory of prices will largely depend on how long the conflict persists and the extent of damage to energy infrastructure across the Gulf.
“For now, oil markets are fixated on the duration of the conflict, halted supplies at Hormuz, and the eventual damage to oil infrastructure,” said Priyanka Sachdeva, a senior analyst at Phillip Nova.
Further supporting prices, a drone attack triggered a fire at the Fujairah Oil Industry Zone in the United Arab Emirates during Asian trading hours. While no casualties were reported, the incident heightened concerns about the vulnerability of key energy facilities in the region.
Crude benchmarks in the Middle East have surged to record highs, reflecting tightening supply conditions. Traders say reduced cargo availability has made regional grades the most expensive globally, as buyers scramble to secure shipments amid uncertainty.
The disruption has forced major producers to scale back output. The Organization of the Petroleum Exporting Countries’s third-largest producer, the United Arab Emirates, has cut production by more than half due to export constraints linked to the closure of Hormuz, according to industry sources.
Analysts say prices could rise further in the near term. Kelvin Wong, a senior market analyst at OANDA, noted that WTI could test resistance levels as high as $124 per barrel if supply disruptions persist and geopolitical tensions escalate.
Efforts are underway to mitigate the impact of rising prices. The head of the International Energy Agency said member countries may release additional crude from strategic reserves, building on the roughly 400 million barrels already earmarked for release. Such measures aim to stabilise markets and ease pressure on consuming economies facing higher fuel costs.
However, analysts caution that reserve releases may offer only temporary relief if the conflict continues to disrupt supply routes.
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The broader geopolitical outlook remains uncertain. Israel said it has prepared for at least three more weeks of military operations, with overnight strikes reported across Iranian territory. The prospect of a prolonged conflict has heightened fears of deeper regional instability, potentially drawing in other actors and further straining global energy supplies.
For now, traders remain on edge, watching for any sign of escalation or de-escalation that could shift the balance in already volatile oil markets.
