Oil extends gains as Iran strikes targets in Strait of Hormuz

Oil prices continued their upward trajectory on Tuesday, mounting gains following reports that Iran targeted "hostile" entities within the Strait of Hormuz. The Iranian move aimed to restrict US naval vessels from the strategically significant waterway, as part of a purported agreement with Oman. West Texas Intermediate crude futures surged past $78 per barrel, climbing roughly 3% from the prior day, while Brent crude settled near $82.

The latest flare-up in tensions unfolded on the night of August 6, local time, following explosions near Qeshm Island in the Hormuz strait, according to the semi-official Fars News Agency. Crude oil prices have since recovered much of the losses sustained earlier in the week, as the potential for a complete reopening of the Hormuz passage dwindles and hopes fade of a swift return of energy flows from the Persian Gulf.

Analysts and investors remain cautiously optimistic about the possibility of a durable deal between Iran and Oman to reopen the Strait of Hormuz. However, the prospects of such an agreement appear uncertain, as per Rob Haworth, senior investment strategy director at US Bank Asset Management Group. "Deals to reopen the Strait of Hormuz remain elusive, with investors teetering in the balance," Haworth stated.

Despite US President Donald Trump's recent assertion that the war will conclude "pretty soon," the conflicting parties remain far apart on the terms for a potential accord. The United States maintains its position on unrestricted transit through the strait and the restoration of pre-war conditions, whereas Iran is advocating for a fee structure.

The conflict in the Middle East seems to be escalating, with Iran-backed Houthis claiming responsibility for a "large-scale" attack against forces aligned with Saudi Arabia. Earlier this week, the militant group announced an attack on a Saudi tanker in the Gulf of Aden, threatening shipping activities in the northern Red Sea.