Oil prices surged to their highest level in a month on Tuesday as renewed hostilities between the United States and Iran entered a third consecutive day, with both sides escalating attacks in and around the Strait of Hormuz — the narrow waterway between the Persian Gulf and the Gulf of Oman through which roughly a fifth of the world's oil supply passes. Brent crude, the primary international benchmark, rose around 2 percent to nearly $85 a barrel, extending a dramatic 9.6 percent gain from the previous session — its largest single-day rise since May 2020. US West Texas Intermediate crude climbed similarly, surpassing $80 a barrel. Both benchmarks had been trading near $70 as recently as early July.
The immediate trigger for the price spike was a fresh wave of US military strikes on Iran — the third night running, targeting what US Central Command described as Iranian capabilities to attack "innocent civilians and commercial shipping." Iran's Islamic Revolutionary Guard Corps responded by striking two UAE-flagged oil supertankers with cruise missiles in the southern lane of the strait, in Omani territorial waters, killing one Indian crew member and wounding eight others, according to the UAE Ministry of Defence. Iran also launched missile and drone strikes against US military assets in Kuwait and Bahrain. President Donald Trump simultaneously announced the reinstatement of a naval blockade of Iranian shipping and proposed charging vessels a 20 percent transit fee for US military protection of the waterway — a declaration that further rattled energy markets.
The crisis has brought shipping through the strait to near standstill. Only 57 vessel transits were recorded from Friday through Sunday, more than a 50 percent drop compared with the previous week, according to ship-tracking platform MarineTraffic. Before the initial US-Israeli strikes on Iran in late February, around 130 vessels transited the strait daily. Traffic had partially recovered following a memorandum of understanding signed by Washington and Tehran on June 17, but the renewed fighting has pushed transit levels back to — or below — their pre-deal lows. The US Department of Energy said 8.5 million barrels passed through the strait on Monday with military assistance and pledged to keep flows moving, but analysts note that emergency stockpiles built up to cushion earlier disruptions are now substantially depleted.
Market analysts warn the situation could deteriorate significantly. "Crude oil is fast losing its strategic petroleum reserve buffer, and a violent repricing up cannot be discounted," said June Goh of Sparta Commodities in Singapore. Bart Melek of TD Securities said a move to $100 a barrel was "quite possible" if physical supply shortages materialise. One Commonwealth Bank strategist projected Brent could reach $100 within ten days and $150 within ten weeks if hostilities persist — a scenario with severe knock-on effects for consumers worldwide. In Australia, where petrol prices already approached 260 cents a litre during April's earlier price spike, economists warned that sustained high oil prices could prompt a fourth interest rate rise this year. Adding to broader regional uncertainty, Yemen's Houthi movement fired missiles at Saudi Arabia on Monday, raising fears of further disruption to crude flows from the wider Gulf region.
The central question for markets, analysts say, is whether physical oil flows through Hormuz can be maintained despite the military confrontation. "If barrels continue to move despite the escalation, part of the current geopolitical premium could gradually fade," said Priyanka Sachdeva of Phillip Nova. But with stockpile buffers thinning, shipping traffic sharply reduced, and no diplomatic resolution in sight, energy markets remain acutely exposed to any further deterioration in the standoff.