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.
