Oil Prices Climb as Iran Threat Raises Fears of Prolonged Middle East Conflict

Oil prices climbed to multi-week highs on Tuesday as concerns over a prolonged conflict in the Middle East intensified following Iran’s warning that it would retaliate against any further US attacks on its assets.

Brent crude futures rose $1.25, or 1.3%, to $98.25 a barrel by 9:30 a.m. Saudi time. US West Texas Intermediate crude gained $2.22, or 2.4%, to $93.70 a barrel.

Brent had earlier reached $98.79, its highest level since July 24, while WTI touched $94.21, marking its strongest price since June 8.

WTI was catching up with Brent after the US Labor Day holiday on Monday, according to Suvro Sarkar, head of energy research at DBS Bank. Brent had already responded to the latest escalation over the weekend because of the different trading schedules.

Sarkar said the renewed hostilities between the US and Iran could significantly alter expectations about oil market risks through the rest of 2026 and into 2027.

Tensions increased after Iran threatened the US with what it described as “economic warfare” and said it had fired an advanced missile at US warships. Iran-backed Houthi forces also attacked several Saudi cities, leaving 73 people injured and forcing some energy facilities to suspend operations.

The latest developments followed US strikes on three Iranian oil tankers on Saturday, including one near Kharg Island, Iran’s main oil export hub, according to US Central Command. The attacks came after strikes by Iran’s Revolutionary Guards against US warships operating in the region.

Analysts warned that continued military action could keep supplies from the Persian Gulf under pressure for months.

Daniel Hynes, an analyst at ANZ, said the latest escalation had increased the possibility of a prolonged standoff involving further military action by both sides. He said Gulf oil supplies could remain constrained through the end of 2026, with a full return to previous production and shipping levels potentially delayed until late in the first quarter or early second quarter of 2027.

Shipping traffic through the Strait of Hormuz also slowed at the start of the week after Tehran warned that it would respond to further US attacks.

The Strait is a vital route for global energy shipments, making any prolonged disruption a major concern for oil markets and importers.

Goldman Sachs has raised its oil price forecasts in response to the changing outlook. The bank increased its December 2026 Brent and WTI forecasts by $5 to $85 and $80 a barrel respectively. Its 2027 forecasts were raised to $80 for Brent and $75 for WTI.

Marex analyst Ed Meir also expects crude prices to remain elevated through the end of the year if the conflict continues, citing unresolved issues that could keep supply risks high.