Oil prices continued to climb on Tuesday amid rising tensions from the ongoing conflict involving the US, Israel and Iran, raising fears of significant supply disruptions from the Middle East.
These developments follow joint air strikes by the US and Israel on Iran over the weekend that resulted in the death of Iranian Supreme Leader Ayatollah Ali Khamenei, which subsequently prompted violent retaliation from Iran.
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The geopolitical strife has particularly affected the Strait of Hormuz, a critical shipping route through which approximately 20% of global oil and gas flows.
Brent crude futures increased by $3.15, or 4.1%, to $80.89 per barrel (bbl) by 07:45 GMT, reported Reuters.
On Monday, Brent reached a peak of $82.37, its highest mark since January 2025, before closing 6.7% higher.
Concurrently, US West Texas Intermediate (WTI) crude rose $4.26, or 5.9%, to $75.49/bbl. In the prior session, it briefly touched its highest level since June 2025 before retreating to finish the day 6.3% higher.
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By GlobalDataThe conflict escalated as Israel conducted attacks on Lebanon, and Iran launched strikes on energy infrastructure in Gulf countries and tankers in the Strait of Hormuz.
The increased hostilities prompted tankers and container ships to avoid the waterway, forcing insurers to retract coverage for vessels transiting the region and causing global shipping rates for oil and gas to soar. The disruption has led to a cascade of effects on refined product futures.
US ultra-low-sulphur diesel futures jumped 8.3% to $3.14 a gallon (gal) after hitting a two-year high on Monday. Meanwhile, gasoline futures rose 3.8% to $2.46/gal following an earlier 3.7% gain.
In Europe, gasoil futures gained 9.2%, settling at $967.75 per tonne.
Compounding the situation, Saudi Arabia shut down its largest domestic oil refinery, Ras Tanura, after a drone strike, further intensifying concerns over regional supply security.
Meanwhile, US Secretary of State Marco Rubio acknowledged that the rise in energy prices was anticipated and assured that a strategy is in place to address the issue.
Rubio highlighted that the plan aims to mitigate the impact of rising prices, noting that markets are likely to react to ongoing developments.
He described the situation as involving a “terroristic regime” that has the potential to disrupt 20% of global energy supplies due to its naval capabilities, and stated that there is an intention to dismantle its naval forces.
Oil markets responded with volatility as restrictions tightened around the vital Strait of Hormuz passage and major maritime insurers withdrew war risk coverage for vessels in the Persian Gulf region due to the intensified clashes with Iran.
US President Donald Trump indicated that these military actions could continue for approximately four weeks.
Meanwhile, Iran’s retaliatory attacks have broadened to include countries such as the United Arab Emirates, Kuwait and Bahrain.
The escalating military crisis in the Middle East is also reverberating in countries such as India. Although New Delhi has been widening its crude procurement to reduce concentration risk, India is still acutely exposed to any regional shock given its continued reliance on Middle East supplies.
The country imports around five million barrels per day (mbbl/d) of crude, with around 52% of that moving through the Strait of Hormuz, making the passage vital to India’s energy security.
Shumita Deveshwar from GlobalData.TS Lombard said: “The disruption to the oil transit route via the Strait of Hormuz will impact >50% of India’s oil imports. Although India buys little oil from Iran, it has increased purchases from West Asia amid US pressure for a trade deal conditional on stopping Russian oil imports.”
Reuters said that India’s imports of Russia’s Urals crude are expected to drop to around 400,000 barrels per day in April, from roughly 2mbbl/d at their June 2025 peak. The shortfall is largely being met by increased supplies from West Asia, supplemented by smaller upticks in shipments from the US and Venezuela.
