Oil rises as risks of prolonged Mideast conflict heighten supply worries

Oil prices continued to rise on Tuesday as concerns over a prolonged Middle East conflict intensified, prompting worries about potential disruptions to supply. Brent crude futures experienced a gain of 34 cents, or 0.35%, reaching $97.34 per barrel, while US West Texas Intermediate crude increased by $1.15, or 1.26%, to $92.63 per barrel.

The Brent price reached its highest level since July 24 in the previous session, amid heightened tensions around the Strait of Hormuz, a crucial route for global crude shipments. Iran had previously warned on Monday that the energy infrastructure throughout the Gulf, including U.S. oil and gas interests, was susceptible to attacks.

The escalating conflict saw tit-for-tat strikes during the weekend, with no indication of progress towards a diplomatic resolution. On Saturday, U.S. forces targeted three Iranian oil tankers, including one near Kharg Island, Iran's principal oil export hub, according to U.S. Central Command. The strikes followed similar attacks by Iran's Revolutionary Guards on U.S. warships in the region.

Daniel Hynes, an analyst at ANZ, expressed concern that the escalating Middle East conflict could prolong the standoff, with potential military action by both nations, which could further constrain Persian Gulf supplies through 2026. "We don't anticipate a full recovery to pre-war throughput until late Q1 or early Q2 2027," Hynes stated.

Financial institutions are also adjusting their forecasts in response to the ongoing tensions. Goldman Sachs has increased its price projections for Brent and WTI crude by $5, predicting $85 and $80 respectively for December 2026, and $80 and $75 for 2027. This adjustment reflects the firm's assumption that disruptions in shipping through the Middle East will continue into 2027.

Additionally, Ed Meir, an analyst at Marex, predicts that as long as the war persists, which he believes will continue due to the numerous unresolved issues, crude oil prices will likely remain elevated through the end of the year.