Oil prices jump 4% as fresh US-Iran fighting stokes supply fears

Oil prices surged around 4% to a one-week peak on Tuesday as renewed US-Iran warfare sparked fears of Middle East supply interruptions. Brent futures climbed $3.44, or 3.8%, to $93.93 per barrel, while US West Texas Intermediate crude CLc1 increased $3.72, or 4.3%, to $89.48. This places Brent on track for its highest close since August 20 and WTI for its highest since July 23.

The US initiated fresh air strikes on Iranian targets on Tuesday, ending hopes that a weekend exchange of fire might not signal a broader resumption of hostilities. Oil prices had already risen following that initial direct attack since July and reports of two tankers struck in the Strait of Hormuz, Iran's critical oil shipping route effectively closed to vessels.

Tehran remained unyielding, warning it would prevent oil exports from the Gulf, despite US President Donald Trump's promise to hit Iran "hard" in response to continued Iranian strikes and US Treasury Secretary Scott Bessent's announcement of imminent new sanctions. US Central Command announced at 12 p.m. ET (1600 GMT) that US forces had commenced targeting Islamic Revolutionary Guard Corps assets in Iran.

The escalated conflict "raised concerns about prolonged disruptions to energy flows through the Strait of Hormuz," said Saxo Bank analyst Ole Hansen. Diesel prices spiked globally due to the war, with US diesel futures trading near a 52-week high on Tuesday after jumping 51% over the past 10 weeks. This surge widened the diesel CLc1-NG1 crack spread, a measure of refining profit margins, to a record high near $106 per barrel.

Russian air strikes on Kyiv and surrounding areas on Tuesday, killing 12 and injuring many, marked the sixth consecutive day of intense assaults on Ukraine's capital. As the world's third-largest crude oil producer after the US and Saudi Arabia, Russia is a member of OPEC+, a coalition of oil-exporting nations. US oil inventories were expected to report on Tuesday, with analysts predicting a 0.8 million barrel decline in crude withdrawn from storage during the week ended August 28, marking the first such decrease in five weeks.