Oil Prices Extend Gains as Hormuz Tensions Deepen Supply Fears

Oil prices climbed for a third consecutive day on Tuesday as the widening conflict between the United States, Israel and Iran intensified concerns about supply disruptions from the Middle East.

Brent crude futures rose $1.70, or 2.2 percent, to $79.44 a barrel by 7:00 a.m. Saudi time. On Monday, Brent surged to $82.37, its highest level since January 2025, before easing to close 6.7 percent higher. US West Texas Intermediate crude advanced $1.17, or 1.6 percent, to $72.40 a barrel after a volatile previous session that saw prices hit their strongest level since June 2025 before settling up 6.3 percent.

The gains reflect mounting anxiety over shipping through the Strait of Hormuz, a narrow waterway through which about 20 percent of global oil and gas supplies pass. Tankers and container vessels have begun avoiding the route as insurers withdraw coverage and freight rates surge.

Tony Sycamore, a market analyst at IG, said the lack of a swift diplomatic breakthrough and Iran’s apparent willingness to target regional energy assets were keeping upward pressure on prices. He noted that risks increase the longer the conflict continues.

The latest escalation followed Israeli strikes that expanded operations into Lebanon, while Iran responded with attacks on energy infrastructure in Gulf countries and on tankers transiting the Strait of Hormuz. Iranian state media reported that a senior official from the Islamic Revolutionary Guards Corps warned the strait was closed and threatened action against vessels attempting passage.

Analysts at ING said markets were assessing the risk of further escalation. While the immediate concern centers on the strait, they cautioned that broader targeting of energy infrastructure across the region would pose a more severe threat and could result in longer-lasting supply outages.

Israeli Prime Minister Benjamin Netanyahu said the conflict may take time but would not stretch into years. Even so, market participants expect oil prices to remain elevated in the near term as traders watch developments closely.

Bernstein revised its 2026 Brent price outlook to $80 a barrel from $65, citing heightened geopolitical risk. In a worst-case scenario involving prolonged hostilities, the firm said prices could spike to between $120 and $150 a barrel.

Refined fuel markets have also reacted sharply. Saudi Arabia reportedly shut its largest domestic oil refinery after a drone strike on Monday. US ultra-low-sulfur diesel futures rose 4.2 percent to $3.0207 per gallon after touching a two-year high, while gasoline futures gained 1.7 percent to $2.4113 per gallon. European gasoil futures climbed 4.3 percent to $925 per metric tonne after an 18 percent surge in the previous session.

With key export routes under threat and regional facilities at risk, traders say volatility is likely to persist in the days ahead.