Oil prices rose for the third consecutive day on Tuesday, driven by escalating conflict between the United States and Israel and Iran, along with emerging threats to maritime security in the Strait of Hormuz. These developments have intensified concerns over potential supply disruptions from the Middle East which is a critical oil-producing region.
Brent crude futures edged higher by 3% to more than USD 80 per barrel after a rally of more than 6% in the previous session taking Brent to as high as USD 82.37, its highest level since January 2025. Similarly, U.S. West Texas Intermediate crude futures rose by more than 4% to more than USD 74 per barrel, following a 6.3% gain in the prior session after briefly touching its highest point since June 2025.
Oil Shipping Lanes Under Threat
The conflict expanded on Monday as Israeli forces attacked targets in Lebanon, while Iran reportedly retaliated by striking energy infrastructure in Gulf nations and targeting tankers in the Strait of Hormuz. According to Iranian news agencies, the Islamic Revolutionary Guards Corps confirmed that a Honduran-flagged fuel tanker, the Athe Nova, was struck by two drones and caught fire in the strait. Later, a senior Revolutionary Guards official was quoted as saying the waterway had been closed and that any vessel attempting to transit would be fired upon.
The Strait of Hormuz is a vital maritime route through which approximately one-fifth of the world’s daily oil demand passes, along with a significant portion of global liquefied natural gas and refined fuels destined for major Asian markets such as China and India. In response to the heightened risk, insurers have withdrawn coverage for vessels operating in the area, prompting many tankers and container ships to avoid the waterway altogether.
Furthermore, market analysts warn that the risks to oil prices remain elevated, particularly if the conflict persists. Analysts have also noted that the absence of a swift de-escalation, combined with the effective closure of the Strait of Hormuz and Iran’s willingness to target regional energy infrastructure, increases the likelihood of sustained upward pressure on prices the longer the conflict continues.
Broader market concerns are also reflected in refined product futures. The Middle East is a major supplier of fuels, and its processing facilities are increasingly vulnerable. On Monday, Saudi Arabia was forced to shut down its largest domestic oil refinery following a drone strike. These events contributed to significant gains in fuel futures: U.S. ultra-low-sulfur diesel futures rose 3.1% to USD 2.991 per gallon after reaching a two-year high, while gasoline futures climbed 1.1% following a 3.7% gain in the previous session. In Europe, gasoil futures advanced 2.7% to USD 909.50 per metric ton, building on an 18% surge on Monday.
Looking ahead, analysts expect oil prices to remain elevated as markets continue to assess the geopolitical landscape and its implications for energy supply. Bernstein Research raised its 2026 Brent price forecast from USD 65 to USD 80 per barrel, cautioning that in an extreme scenario involving prolonged conflict, prices could climb as high as USD 120 to USD 150 per barrel. The ongoing tensions have unsettled investors and heightened the perceived risk of broader instability across the Middle East.
