Oil prices surged to their highest level in a month on Tuesday morning, after rising more than 9 per cent in the previous session amid attacks carried out by the US and Iran, with Tehran also targeting tankers in the Strait of Hormuz.
Brent, the benchmark for two thirds of the world’s oil, was trading 1.63 per cent higher at $84.66 per barrel at 8.18am UAE time, while West Texas Intermediate, the gauge that tracks US crude, was up 1.88 per cent at $79.61 a barrel. Both benchmarks rose sharply on Monday, with Brent jumping 9.6 per cent, marking its biggest daily gain since May 2020.
Oil prices are now at their highest level since the US and Iran signed an interim deal to end the war on June 17.
Fighting has intensified in recent days, with the US saying it carried out a wave of strikes on Iranian targets on Monday. The US has reinstated its naval blockade on Iran, with President Donald Trump also saying on Monday night that he would charge vessels a 20 per cent tax to cross the strait under the watch of American forces.
Iran has continued its attacks on shipping, striking two UAE supertankers in the strait on Tuesday, killing one sailor and injuring eight. The tankers Mombasa and the Bahiya were struck by two Iranian cruise missiles in the southern part of the waterway, the UAE Ministry of Defence said.
Tehran has said it will not uphold its commitments under the interim deal unless the US does the same.
"The path towards a lasting agreement remains fragile," said Daniela Hathorn, senior market analyst at Capital.com. However, rather than viewing the strait as simply open or closed, "investors increasingly see it as a continuum of disruption, where shipping volumes, insurance costs and operational risks can fluctuate without necessarily leading to a complete halt in global energy flows", she added.
Oil and natural gas should continue to flow through the strait, even if the current disruption persists, through adaptation developed throughout the conflict, said Norbert Rucker, head of economics and next-generation research at Julius Baer.
"It is unlikely that the pragmatism which built up over the past weeks and months will lastingly reverse," he said. "We stick to our cautious view on oil but acknowledge that the hot-tempered adversaries will add some froth for the time being."
