Crude Oil Prices Climb on Fears of Sustained Middle East Supply Disruptions

October WTI crude oil (CLV26) rose by +1.99 (+2.32%) on Tuesday, while October RBOB gasoline (RBV26) increased by +0.0153 (+0.50%). Crude and gasoline prices extended their sharp gains into a second consecutive session, with crude oil reaching a six-week high. The upward momentum is driven by escalating hostilities between the United States and Iran, fueling concerns over prolonged disruptions to energy flows through the strategic Strait of Hormuz.

Crude prices climbed after two oil supertankers were struck by projectiles late Monday while attempting to transit the Strait of Hormuz. These attacks followed Sunday’s U.S. strikes on Iranian rocket launchers intended to mine the vital waterway, and Iran’s subsequent retaliation with missiles and drones targeting U.S. air bases in Jordan and the United Arab Emirates.

President Trump recently stated that the U.S. naval blockade on Iranian ports is exerting significant pressure on the country, though he provided no timeline for resolving the conflict. According to a Monday report by Axios, President Trump is considering limited military strikes against Iran to prevent the regime from rebuilding its military capabilities.

Crude prices also received support from renewed Israeli military actions against Iran-backed Hezbollah in Lebanon, which dampened prospects for a swift de-escalation of hostilities and the rapid reopening of the Strait of Hormuz. Concurrently, Israel has targeted Iran-backed Hamas in Gaza, and Yemen-based Houthis have continued to attack commercial vessels in the Red Sea, with multiple ships sustaining projectile damage in the Strait of Hormuz.

In a supporting factor, the International Energy Agency (IEA) stated in its August 12 monthly report that the global oil supply deficit is expected to worsen, despite demand pressures from the ongoing conflict and elevated prices. The IEA forecast that global oil inventories will decline in the third quarter at double the previously estimated rate due to persistent supply disruptions stemming from the U.S.-Iran war.

Concerns over further disruptions to Russian crude production have also lent support to prices. A Bloomberg report last Wednesday indicated that Russia is preparing to escalate its military campaign in Ukraine, concluding that negotiations for a peace agreement have reached an impasse. Ukraine has intensified drone strikes on Russian energy infrastructure, attacking refineries, oil tankers, and major pipeline networks at least 30 times in July—the second-highest monthly tally since the conflict began in 2022. According to EA Analytics, Russian crude-processing rates averaged 3.51 million barrels per day (bpd) in July, the lowest level in 24 years, due to infrastructure damage. Consequently, Russia’s crude production fell to 8.89 million bpd in July, a six-year low, according to secondary estimates published by OPEC. Furthermore, Reuters reported last Friday that Russia’s gasoline production dropped to approximately 80,000 tons per day in August, representing only 70% of domestic demand and causing widespread fuel shortages.

These upward gains were partially offset by signs of increased oil shipments from the Middle East. Last Friday, Goldman Sachs noted that oil exports from the Persian Gulf had risen to between 15 million and 16 million bpd, roughly two-thirds of pre-war levels.

On the bearish side, OPEC delegates approved on August 2 a final increase of +188,000 bpd in crude production for September. This adjustment completes the restoration of the 1.65 million bpd supply cut implemented in 2023, with the group intending to maintain output levels steady for the remainder of the year following the September hike. However, achieving these production increases may prove challenging given the renewed military tensions in the region. OPEC’s July crude output rose by +1.16 million bpd to 19.44 million bpd.

Separately, Vortexa reported on Monday that crude oil stored on tankers stationary for at least seven days increased by 7.1% week-over-week to 107.58 million barrels for the week ending August 28.

Data from last Wednesday’s Energy Information Administration (EIA) report revealed that as of August 21, U.S. crude oil inventories stood 1.3% above the five-year seasonal average, while gasoline inventories were 5.9% below the seasonal average, and distillate inventories were 14.6% below the five-year seasonal average. U.S. crude oil production for the week ending August 21 rose by 0.1% week-over-week to 13.843 million bpd, just shy of the record high of 13.862 million bpd reached in November 2025.

Finally, Baker Hughes reported last Friday that the number of active U.S. oil rigs fell by five to 447 rigs for the week ending August 28, slightly below the 1.25-year high of 455 rigs recorded in the week of August 14.

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