Oil Futures Jump as US-Iran Conflict Threatens Strait of Hormuz Energy Flows

October WTI crude oil (CLV26) settled higher by $4.46, or 5.20%, on Tuesday, while October RBOB gasoline (RBV26) gained 5.81 cents, or 1.89%.

Crude oil and gasoline prices climbed sharply on Tuesday, with crude reaching a six-week high. The rally was driven by an escalation in hostilities between the United States and Iran, which raised fresh concerns about prolonged disruptions to energy shipments through the strategic Strait of Hormuz.

Crude prices accelerated after two oil supertankers were struck by projectiles late Monday while attempting to exit the Strait of Hormuz. The attacks followed U.S. strikes on Sunday against Iranian rocket launchers that were reportedly preparing to deploy mines into the waterway. Iran responded by firing missiles and drones at American air bases in Jordan and the United Arab Emirates.

Prices spiked again Tuesday afternoon when the United States launched a new round of strikes against targets inside Iran, citing Tehran’s attempt to mine the Strait of Hormuz and earlier attacks on a U.S. military base in Jordan. Iran vowed “severe punishment” and warned that it would target American bases and interests across the Middle East in retaliation.

President Trump recently noted that a U.S. naval blockade on Iranian ports is exerting pressure on the country, though he offered no timeline for resolving the broader conflict.

Additional support came from renewed Israeli operations against Iran-backed Hezbollah in Lebanon, which diminished expectations for a quick resolution to regional hostilities and a reopening of the Strait of Hormuz. Separately, Israel struck Iran-backed Hamas targets in Gaza, Yemen-based Houthi forces continued attacks on shipping in the Red Sea, and several vessels were hit by projectiles in the Strait of Hormuz.

On the supply side, the International Energy Agency (IEA) noted in its August 12 monthly report that the global oil supply deficit is set to widen, even as demand takes a hit from the war and elevated prices. The agency projected that global oil inventories will decline in the third quarter at twice the pace previously estimated, citing ongoing disruptions tied to the U.S.-Iran conflict.

Further support for crude stemmed from concerns that Russian production could face additional disruption. A Bloomberg News report last Wednesday indicated that Russia is preparing to escalate attacks on Ukraine after concluding that peace negotiations have reached an impasse.

Ukraine has intensified drone strikes on Russian oil infrastructure, curbing both production and exports. According to recent data, Ukrainian forces targeted Russian refineries, oil tankers, and major pipeline facilities at least 30 times in July, the second-highest monthly tally since the war began in 2022. EA Analytics reported that Russian crude-processing rates averaged 3.51 million barrels per day in July, the lowest in 24 years, amid damage caused by Ukrainian drone and missile attacks. The strikes pushed Russia’s crude output down to 8.89 million bpd in July, the lowest in six years, according to secondary source estimates from OPEC. Meanwhile, Reuters reported last Friday that Russian gasoline production fell to roughly 80,000 tons per day in August, meeting only 70% of domestic demand and triggering shortages across the country.

On the bearish side, signs emerged of larger oil volumes leaving the Middle East. Last Friday, Goldman Sachs reported that oil exports from the Persian Gulf have climbed to between 15 million and 16 million bpd, roughly two-thirds of pre-war levels.

OPEC delegates approved their final production increase of 188,000 bpd for September on August 2, completing the restoration of the 1.65 million bpd in supply cuts originally implemented in 2023. The group indicated it plans to hold output steady for the remainder of the year following the September hike. However, those increases may be difficult to deliver amid renewed U.S.-Iran military activity in the region. OPEC’s July crude production rose by 1.16 million bpd to 19.44 million bpd.

According to Vortexa, crude oil stored on tankers that had been stationary for at least seven days increased 7.1% week-over-week to 107.58 million barrels in the week ended August 28.

Analysts surveyed ahead of Wednesday’s EIA report projected a 60,000-barrel build in U.S. crude inventories and a 1.6 million-barrel draw in gasoline supplies.

Last Wednesday’s EIA report showed that as of August 21, U.S. crude oil inventories stood 1.3% above the seasonal five-year average, gasoline inventories were 5.9% below the five-year average, and distillate inventories were 14.6% below the five-year seasonal average. U.S. crude production in the week ending August 21 edged up 0.1% week-over-week to 13.843 million bpd, just shy of the record high of 13.862 million bpd set in November 2025.

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

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