Oil climbs 2%, extending gains on dimming US-Iran peace hopes

Oil prices climbed 2% on Tuesday, reaching a one-week high as concerns over a possible U.S.-Iran peace agreement diminished and Middle East supply disruptions loomed. Brent futures climbed $1.19, or 1.4%, to $88.91 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.07, or 1.3%, to $83.20. Both contracts surged nearly 5% on Monday as hopes for a U.S.-Iran peace deal waned.

Iran's Supreme National Security Council chief Mohsen Rezaei warned Tuesday that the Strait of Hormuz would stay closed until Tehran accepts Iran's demands to end the conflict. The strait carries about 20% of global oil supplies. Shipping through the Hormuz Strait dropped to six vessels on Monday, a 10-day low, compared to an average of 11 vessels over the past 10 days.

Before the war, around 125-140 vessels typically passed through daily. Meanwhile, Yemen's Iran-backed Houthi rebels targeted a Saudi vessel carrying military equipment in the Bab el-Mandeb strait, and a missile attack on a container ship off Pakistan was reportedly a U.S. strike. Middle Eastern producers may struggle to return to pre-conflict oil output by year-end, even if trade patterns normalize early next year, according to the U.S. Energy Information Administration.

Elsewhere, the Ukrainian military struck an oil refinery in Russia's Orenburg region, the second-largest industrial hub, adding to global energy supply constraints. Brent futures have risen about 44% this year, driven by heightened tensions in Ukraine and Iran.