Oil Prices Rise Modestly as Markets Balance Supply Growth Against Middle East Risks

Oil prices edged higher on Tuesday as investors weighed improving supply conditions against lingering geopolitical uncertainty in the Middle East, with attention increasingly shifting toward global demand and the pace of crude export recovery.

Brent crude futures gained 38 cents, or 0.5%, to $72.37 a barrel, while US West Texas Intermediate (WTI) crude rose 30 cents, or 0.4%, to $68.85 a barrel in early trading. The gains followed Monday’s session, when both benchmarks settled near levels seen before the Iran conflict disrupted global energy markets.

Market analysts said easing tensions in the Gulf have reduced the risk premium that had supported oil prices during the conflict, but uncertainty continues to influence trading.

Tim Waterer, chief market analyst at KCM Trade, said the gradual recovery in oil supply has eased immediate concerns, although traders remain cautious given the unpredictable nature of relations between the United States and Iran.

He noted that future price movements are likely to depend on whether demand, particularly from China, strengthens enough to absorb additional supplies entering the market.

Geopolitical developments remained in focus after US President Donald Trump said Washington would either reach an agreement with Iran or “finish the job,” renewing warnings of possible military action while Tehran maintained a defiant stance following the funeral of former Supreme Leader Ayatollah Ali Khamenei.

Shipping activity through the Strait of Hormuz also continued to attract close attention. According to media reports citing US officials, Iran’s Revolutionary Guards fired missiles at commercial vessels transiting the strategic waterway on Monday night. The ships reportedly sustained damage but there were no casualties.

Shipping data on Tuesday showed Japanese-operated supertankers carrying Saudi crude were moving through the Strait of Hormuz, joining other vessels that had resumed voyages after being delayed during the conflict.

Despite increased maritime activity, analysts said the recovery in oil exports remains slower than initially expected. ANZ analysts said tanker traffic through the strait has yet to return to normal levels, with vessel crossings remaining limited as shipping companies continue to exercise caution despite recent diplomatic progress.

Supply is also increasing elsewhere. The United Arab Emirates raised crude production above 3.8 million barrels per day in June, its highest level since April 2020 and above production levels recorded before the Iran conflict, according to Reuters estimates.

Meanwhile, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed over the weekend to increase production targets by an additional 188,000 barrels per day from August, following similar increases approved for June and July.

Saudi Arabia also adjusted its pricing strategy, cutting the August official selling price for its flagship Arab Light crude supplied to Asian buyers. The reduction, announced by Saudi Aramco, marked the largest monthly price cut in more than two decades and reflects growing competition as producers seek to maintain market share while additional supplies return to global markets.

Traders are expected to continue monitoring demand indicators, shipping activity and geopolitical developments for further direction in the oil market.