West Texas Intermediate (WTI) crude oil prices rose 2.6% to $84.40 per barrel on Tuesday, driven by persistent concerns over potential disruptions to global oil supplies despite hopes for diplomatic de-escalation in the Middle East.
The market remains focused on geopolitical developments as U.S. airstrikes in Iran entered their tenth consecutive day. President Donald Trump reiterated on Monday that Iran would “pay” for the deaths of three U.S. service members, while the Iranian Islamic Revolutionary Guards Corps (IRGC) claimed to have targeted U.S. military bases in Bahrain and Kuwait.
tensions intensified further after Iran-backed Ansar Allah rebels in Yemen announced a maritime embargo against Saudi Arabia in the Red Sea. This development reinforced fears over regional energy logistics, heightening risks to shipping routes through the Strait of Hormuz—a critical global oil export chokepoint.
Markets are now assessing diplomatic prospects between Washington and Tehran. While a resolution could temper price gains, immediate worries about supply disruptions continue to dominate trading activity.
Investors will closely monitor the weekly American Petroleum Institute (API) crude oil inventory report, scheduled for release later Tuesday.
BNY Mellon analysts noted that the prolonged strikes sustain elevated shipping risks, leaving oil prices elevated with a “geopolitical premium.” They highlighted that Brent crude reached $88.45 per barrel and U.S. gasoline exceeded $4 per gallon, warning that disruptions in the Strait of Hormuz could tighten global supplies and amplify oil-related inflation risks.
Deutsche Bank observed that oil prices partially recovered from earlier declines after Ansar Allah reaffirmed its blockade announcement, which could exacerbate supply constraints. While some Iranian officials hinted at mediation efforts, rising rhetoric from the group and U.S. officials kept Brent crude up 1.27% at $89.22 per barrel.
OCBC strategists emphasized that maritime traffic through the Strait of Hormuz has significantly slowed, with oil prices responding to reports of Ansar Allah’s planned Red Sea restrictions. They cautioned that restricting alternative routes like the Bab el-Mandeb Strait could tighten Middle Eastern oil supply, potentially pushing prices above $100 per barrel—40% above current Brent levels.
MUFG analysts linked the market’s focus to escalating U.S.-Iran tensions and Ansar Allah’s involvement in the conflict. They noted operational steps by the Saudi-led coalition to secure Red Sea shipping, while also warning that sustained blockades are unlikely due to the group’s limited capabilities.
The analysts added that rerouted shipping via the Suez Canal or around the Cape of Good Hope could temporarily raise freight and transportation costs, though such disruptions are not expected to persist long-term.
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- Australian Dollar Pulls Back from Monthly PeakThe AUD/USD pair traded lower near the 0.7010 mark on Tuesday, marking a retreat from its four-week high. Despite this decline, the Australian Dollar remains positioned above the key psychological threshold of 0.7000, supported by cooling United States economic data that has tempered demand for the US Dollar (USD).The US Dollar remains largely stable as market participants weigh rising geopolitical tensions in the Middle East against evidence of slowing US inflation. While geopolitical instability and elevated oil prices continue to drive safe-haven inflows, recent inflation metrics have lowered expectations for further aggressive interest rate hikes by the Federal Reserve. Consequently, the US Dollar Index (DXY) is hovering near 101.00, following its highest level since mid-July.Recent US Consumer Price Index (CPI) data showed a monthly decline of 0.4% in June, with the annual rate moderating to 3.5%. This downward trend in inflation was further supported by weaker producer-price data, which has helped the Australian Dollar maintain its strength despite the geopolitical support for the Greenback.The US labor market also showed signs of slowing. The ADP Employment Change four-week average dropped to 16.5K, down from the revised 19.25K, indicating a deceleration in private-sector hiring. This cooling in the labor market prevented a significant recovery for the US Dollar and allowed the AUD/USD to hold above the 0.7000 level.Market attention now shifts to Australia’s June employment data due this Thursday. Economists expect employment to grow by 15K, a significant slowdown from the previous 40.3K increase. The unemployment rate and participation rate are both forecasted to remain steady at 4.4% and 66.7%, respectively.Short-term technical analysis:On the 4-hour timeframe, AUD/USD is trading at 0.7007, maintaining a position above the 20-period Simple Moving Average (SMA) at 0.6998 and the 100-period SMA at 0.6946. This positioning suggests a mildly bullish near-term bias. Price action is currently supported by a horizontal floor at 0.7003, while the Relative Strength Index (RSI) sits near 57, indicating constructive momentum without being overbought as the pair consolidates below recent peaks.On the upside, immediate resistance is located at 0.7014, with a tighter barrier at 0.7019 where recent supply has been identified. On the downside, immediate support is found at 0.7003, followed by the 20-period SMA at 0.6998 and a secondary horizontal support at 0.6997. The 100-period SMA at 0.6946 remains well below, reinforcing the underlying bullish structure as long as current price levels hold.