Brent crude rose above $84 a barrel after Iran attacked oil and product storage at Fujairah and a fuel tank at Oman’s Duqm port, escalating the situation beyond the blocked Strait of Hormuz to alternative Gulf export routes.
Brent, the benchmark for two-thirds of the world's seaborne oil, was up 7.11 per cent at 3.53 pm UAE time to $84.72 a barrel, while West Texas Intermediate, the gauge tracking US crude, was 6.15 per cent higher at $77.38 a barrel.
Brent rose past $80 a barrel for the second time this week after it jumped more than 11 per cent during opening trading following US attacks on Iran, which killed the country's leader and Tehran's subsequent retaliatory attacks against Gulf states.
Iranian drones and missiles have hit several Gulf energy sites, including fuel storage tanks in the UAE's Port of Fujairah and fuel tanks at Oman's Indian Ocean-facing Port of Duqm, which was also attacked on Sunday.
On Monday, Saudi Arabia's large domestic refinery Ras Tanura was struck, leading to a shutdown. Iran denied targeting the Saudi facility on Tuesday. Attacks also led to the shutdown of the world's largest liquefied natural gas plant in Qatar, which meets 20 per cent of the world's supply of the fuel. The operator QatarEnergy also said it was shutting down all petrochemical production on Tuesday.
Crude and gas shipments transiting the Strait of Hormuz, which handles a fifth of the world's oil supplies, remain severely restricted. Iran has attacked three tankers in the narrow waterway controlled jointly by Iran and Oman, leading to an unofficial suspension of trade.
Before the regional escalation, about 20 million bpd of oil and refined products flowed through the strait.
Iran's Islamic Revolutionary Guard Corps has also warned ships to avoid crossing the waterway. Shipping companies are avoiding the route as a precaution and levying a war risk surcharge for transporting goods through the strait.
The restrictions also affect Iran's ability to get its oil supply to market. The Opec member produces around 3.3 million bpd, constituting about 3 per cent of global supply, with around 1.3 million bpd going to China.
Swiss private bank Union Bancaire Privee expects Brent to rise to about $120 a barrel if the Strait of Hormuz is closed for a long time or there is significant damage to export terminals and infrastructure, coupled with a substantial loss of Iranian production.
In a scenario of limited shipping harassment with no lasting damage to supply or shipping, “Brent crude prices may spike temporarily before retracing to approximately $70 per barrel", UBP’s Michael Lok and Nicolas Laroche said in a note on Tuesday.
"In a prolonged conflict scenario, we see oil prices reaching into the $100s per barrel, as we and regional exports warned," Helima Croft, head of global commodity strategy and Mena Research at RBC Capital Markets, said in her Tuesday note.
BMI, a Fitch Solutions company, maintained its crude oil forecast for the year despite current tensions, as oil markets remain oversupplied.
“We are maintaining our 2026 Brent crude forecast at $67 per barrel, despite a stronger-than-expected price performance in the first quarter and the outbreak of military hostilities between the US, Israel and Iran,” BMI said.
“Our analysts’ core view for a short-lived, albeit large, campaign is consistent with a brief spike in oil prices in March, followed by rapid retracement heading into the second quarter, as geopolitical risk premia fade and investor focus shifts back towards loose underlying fundamentals,” BMI said.
