Brent and WTI oil prices rise after reported U.S. strike on Iran

Oil prices surged past $105 per barrel on Tuesday following reports of a US military strike on Iran's Qeshm Island, reigniting worries about conflict escalation and potential disruptions at the Strait of Hormuz. Brent crude, representing two-thirds of global oil supply, rose 2.03% to nearly $107 a barrel, while US West Texas Intermediate crude climbed 1.75% to $98.15 a barrel.

This increase came after a significant drop earlier in the week, with Brent and WTI falling more than 7% from Monday's levels, with Brent closing at $104.77 and WTI at $96.46.

US forces reportedly targeted Iran's Qeshm Island overnight, according to The Wall Street Journal, citing US officials. The attacks were described as defensive measures to prevent Iran from targeting commercial vessels in the strategic Strait of Hormuz. Iranian state media reported multiple explosions on the island, located at the Hormuz's mouth. This was part of a series of limited strikes by Washington in recent weeks, kept discreet to avoid signaling a resumption of full-scale military operations against Iran.

The strikes have stirred uncertainty in the oil market, pushing Brent near $105 per barrel. Daniel Richards, a senior economist at Emirates NBD, noted that the renewed tensions are complicating diplomatic efforts. The latest military action coincides with the US midterm elections taking place on Tuesday, which may influence the political landscape and the prospects for normalizing supply conditions.

Senior analyst Ipek Ozkardeskaya at Swissquote highlighted that the election's outcome could either expedite supply restoration or prolong the supply crisis.

The Strait of Hormuz, a critical shipping lane linking the Gulf to global markets, was responsible for transporting about a fifth of the world's crude oil and natural gas supplies before the conflict started in late February. Oil prices had reached a six-month peak at the end of October due to strikes on the Hormuz and fears of further escalation post the midterm elections.