Oil Prices Surge to Monthly Peak Amid Escalating US-Iran Tensions in the Strait of Hormuz

Oil prices have climbed to a one-month high as ongoing hostilities between the United States and Iran enter a third consecutive day, fueling fears regarding stability in the strategic Strait of Hormuz.

Brent crude, the leading international benchmark, rose by 2 percent on Tuesday, following a substantial 9.6 percent jump from the previous day.

Brent futures for September delivery reached $84.91 a barrel as of 03:30 GMT, marking its highest level since June 15.

Following a brief period of price stabilization after Washington and Tehran signed a memorandum of understanding (MoU) for peace last month, Brent has surged approximately 17 percent from the levels seen before the US-Israel conflict involving Iran began in late February.

US Central Command announced on Monday that military strikes against Iran have continued for a third day, stating that operations aimed to neutralize Tehran’s ability to target “innocent civilians and commercial shipping” within the Strait of Hormuz.

In retaliation, Iran’s Islamic Revolutionary Guard Corps claimed responsibility for attacks on two oil supertankers in the strait, as well as missile and drone strikes against US military installations in Kuwait and Bahrain.

Market volatility was further heightened by US President Donald Trump’s announcement on Monday that Washington intends to reimpose its blockade of Iranian ports and begin collecting transit fees as the “guardian” of the critical waterway.

“Crude oil is rapidly exhausting its strategic petroleum reserve buffer, and a significant upward repricing cannot be ruled out until market rhetoric from both parties de-escalates,” June Goh, a senior oil market analyst at Sparta Commodities in Singapore, told Al Jazeera. Goh was referring to the US government’s emergency stockpile, which the Trump administration has utilized to offset supply constraints.

While shipping traffic through the Strait of Hormuz had recently increased on hopes of a permanent peace agreement, volumes have since plummeted due to the renewed threat of violence against commercial vessels.

According to ship-tracking platform MarineTraffic, only 57 transits were recorded from Friday through Sunday, representing a decline of over 50 percent compared to the previous week.

Prior to the initial US and Israel strikes on Iran in late February, the strait averaged roughly 130 vessel transits per day.

“Traffic through Hormuz is essentially grinding to a halt, returning to—or even falling below—the levels seen before the MoU,” Rory Johnston, founder of the oil research firm Commodity Context, told Al Jazeera.

“The oil market has shown incredible patience during this crisis, largely due to an ample stock cushion that helped blunt the initial supply shock,” Johnston noted. “Unfortunately, much of that buffer has been depleted, leaving us far more vulnerable to a repeat of the shortages seen in March and April.”

Despite Iran’s declaration on Sunday that the waterway is closed “until further notice,” the Trump administration has attempted to reassure markets that the strait will remain open to shipping.

The US Department of Energy reported on Monday that 8.5 million barrels of oil passed through the strait the previous day with US military assistance, noting that flow remains “consistent with the recent average.”

“The US military will ensure that oil flows continue, regardless of Iranian actions, to maintain market supply,” the department stated.

Bart Melek, global head of commodity strategy at TD Securities in Toronto, suggested that oil prices could see further significant increases as US-Iran hostilities resume.

“I suspect a move toward $100 is entirely possible if physical shortage risks become increasingly evident and likely,” Melek told Al Jazeera.

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