(Bloomberg) — US oil prices topped $90 a barrel for the first time since late July as fresh American strikes on Iran raised concerns about prolonged disruptions to energy flows through the Strait of Hormuz.
West Texas Intermediate rose as much as 5.1% after US forces stuck targets in Iran starting at 12 p.m. Eastern time on Tuesday, according to a post on X from US Central Command. The post cited “attempted attacks” against commercial shipping in Hormuz. Two oil supertankers were hit by projectiles while attempting to exit the waterway late Monday.
Traders are on tenterhooks over how far the escalation could go, after Iran’s Islamic Revolutionary Guard Corps warned that “severe punishment” awaits the US.
The fresh gains for oil prices are rippling through global markets as higher energy costs stoke concerns over inflation and the potential for rising interest rates. Global bond yields climbed back to the highest level in almost two decades on Tuesday.
Crude notched a marginal gain in August after a volatile month, with prices up more than 50% this year as hopes for a resolution have repeatedly surfaced, only to fade amid stop-start diplomacy. Iran said on Tuesday that current conditions preclude talks on returning to the Memorandum of Understanding signed with the US.
With renewed conflict in the Middle East continuing to crimp flows through Hormuz and the global diesel market still tight, the path of least resistance for oil prices remains higher, according to Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc.
Hostilities in the Middle East, as well as the war between Russia and Ukraine, have sent refined-product prices rallying even more sharply than crude as supplies tighten, particularly for diesel. The profit margin for making diesel from crude oil soared to a fresh all-time record Tuesday.
The US, meanwhile, continues to pledge to cripple Iran’s economy as concerns mount that the conflict is draining American firepower and is increasingly unpopular at home, raising questions about the sustainability of the campaign. Treasury Secretary Scott Bessent dismissed the importance of Hormuz, saying it will soon be bypassed with oil pipelines and rendered a “worthless piece of water.”
Still, the rally remains somewhat limited as exports continue to move through Hormuz, often on tankers with their transponders switched off to avoid detection. Persian Gulf producers including the UAE, Saudi Arabia, Kuwait and Iraq are all getting some barrels out. Even so, vessels transiting the waterway face a constant threat of attack.
“Adaptation to prolonged disruption through the Strait of Hormuz — with dark flows, bypass routes and recovering Gulf exports — has helped keep Brent below $100 a barrel,” Bloomberg Intelligence analysts Salih Yilmaz and Will Hares wrote in a note. “Yet renewed US-Iran hostilities underscore the risk that further disruption could quickly push an already constrained market into a much tighter balance.”
Separately, Abu Dhabi National Oil Co. has restored its Ruwais refinery to full capacity after it was damaged earlier in the war, according to people familiar with the situation. The facility, one of the world’s biggest, has been running at its full potential for about a month, boosting exports of diesel and jet fuel.
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–With assistance from Kanoko Matsuyama.
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