Oil prices rise as latest fighting resurrects Middle East supply disruption risks

Oil prices surged nearly 4% to a one-week high on Tuesday as renewed fighting between the U.S. and Iran sparked concerns of Middle East supply disruptions. Brent crude futures increased $3.44, or 3.8%, to $93.93 per barrel, while U.S. West Texas Intermediate (WTI) crude rose $3.72, or 4.3%, to $89.48. This brings Brent on track for its highest close since August 20 and WTI for its highest since July 23.

U.S. air strikes on Iranian targets on Tuesday dashed hopes that last weekend's exchange of fire might not signal a renewed conflict.

Oil prices had already climbed following the initial direct attacks since July and reports of two tankers struck in the Strait of Hormuz, the key global oil supply route Iran has effectively closed. Iran remained defiant, threatening to block oil exports from the Gulf, despite threats from U.S. President Donald Trump to retaliate against Iran and warnings from U.S. Treasury Secretary Scott Bessent of further sanctions.

U.S. forces launched attacks on Islamic Revolutionary Guard Corps (IRGC) targets in Iran, following recent IRGC attacks on commercial shipping in the Strait of Hormuz and American service members in the region. This heightened the risk of prolonged disruptions to energy flows through the Strait of Hormuz, according to Saxo Bank analyst Ole Hansen.