Oil prices continued to climb to hit above $85 a barrel on Tuesday, marking their highest level in about four weeks as U.S. strikes on Iranian military targets and disruptions to shipping through the Strait of Hormuz heightened supply concerns.
Brent crude rose to its highest since June 12, and West Texas Intermediate (WTI) to its highest since June 16 – before the U.S. and Iran signed a memorandum of understanding to end the conflict on June 17.
Brent crude futures were up $3.17, or 3.81%, at $86.47 per barrel at 9:41 a.m. GMT, while WTI crude rose $2.15, or 2.75%, to $80.29 a barrel.
"Despite signing the memorandum of understanding and having a deal, this did not last for even a few weeks. So that's the concern the market is trying to price right now," said ANZ analyst Soni Kumari.
"What we think is that the peak of the escalation is behind us, but there are upside risks to oil prices if these disruptions continue, and that will keep prices in the $85-$90 range."
Hostilities between the U.S. and Iran intensified this week, as U.S. President Donald Trump reinstated a blockade of Iranian shipping and proposed charging a 20% fee to guard the Strait of Hormuz.
The waterway is a critical artery for global energy trade, carrying about a fifth of the world's daily oil and liquefied natural gas (LNG) supplies before the conflict began.
On Monday, Trump formally notified Congress of resuming military operations, and the U.S. Central Command (CENTCOM) said its latest five-hour operation targeted military sites along Iran's southern coastline, including coastal defense systems, missile and drone facilities, and maritime capabilities.
The targets were located in Bushehr, Chah Bahar, Jask, Konarak, Abu Musa and Bandar Abbas, according to CENTCOM, which said the strikes were intended to weaken Iran's ability to attack commercial shipping.
Trump said American forces were targeting Iran's military capabilities linked to the Strait of Hormuz and reinstating a blockade on Iran and vessels doing business with Tehran.
Commercial traffic through the strait has slowed to a near halt amid the renewed strikes, security warnings, and growing uncertainty over the blockade.
Trump also said Washington wanted reimbursement from Gulf countries benefiting from what he said was U.S. protection of the strait, including Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, and Bahrain.
Adding to tensions were fresh attacks by Houthi rebels on Saudi Arabia on Monday after accusing the kingdom of bombing an airport under its control.
"If the Houthis extend their attacks to Saudi's crude products in the Red Sea, it could put (further) uncertainties on crude flows from the region," Simon Wong, a portfolio manager at Gabelli Funds, said in a note.
Meanwhile, Ukraine's military said on Tuesday that it struck two Russian oil refineries in the Bashkortostan and Krasnodar regions overnight.
