Oil gained for a second day as the US and Israel stepped up attacks against Iran and the sprawling conflict’s impact on Persian Gulf energy assets deepened.
US oil futures rose to settle above $74.50 a barrel, closing out the biggest two-day advance in four years, while Brent closed at more than $81. Prices eased in post-settlement trading after President Donald Trump said the US will escort tankers through the Strait of Hormuz, a key tanker route, and provide insurance to ships.
Trump’s remarks abruptly halted a breathless, two-day rally that had been fueled by worst-case fears of a prolonged disruption to traffic through the strait, a chokepoint for roughly one-fifth of global crude supplies.
The American president earlier told reporters at the White House that oil prices are a “little high,” but that when the conflict ends “those prices are going to drop.” Traders have been speculating that Washington could take measures to keep a lid on the price of gasoline and other energy sources, one of Trump’s campaign pledges.
Rising energy costs already are casting a pall over economic growth prospects and the ability of central banks to keep inflation in check.
Meanwhile, Iraq cut output at the giant Rumaila oil field and appears poised to shutter about 3 million barrels a day of output if the crisis persists, according to people familiar with the situation. Some Iraqi storage tanks are running out of spare room because of the shipping constraints in Hormuz.
Saudi Arabia, for its part, is exploring the option of delivering more barrels from the Red Sea, which sits on the opposite side of the country from the Strait of Hormuz. Still, the Red Sea is far from risk-free, with Yemen’s Iran-backed Houthi militant group threatening to resume attacks on vessels in the waterway.
The fallout for energy markets has sent global benchmark Brent crude jumping 11% in just two days, at one point surpassing $85 a barrel for the first time since July 2024 on Tuesday. The rally was tempered after an International Energy Agency document showed the body is ready to help stabilize the global oil market in the wake of the conflict.
“With the Strait of Hormuz still inactive, the clock is ticking,” JPMorgan Chase & Co. analysts including Natasha Kaneva wrote in a note, flagging scope for some Persian Gulf producers to cut output within weeks if storage fills. For now, gains in prices “remain contained — despite the staggering geographic scope of the conflict and growing proximity to energy infrastructure — reflecting that a substantial risk premium is already priced,” they added.
The war has ensnared multiple countries. On Monday, Saudi Aramco halted operations at its Ras Tanura refinery after a drone strike. Debris from an intercepted drone also caused a major fire at the United Arab Emirates oil-trading hub of Fujairah.
The US Embassy in Saudi Arabia issued an alert on Tuesday warning of “imminent missile and UAV attacks over Dhahran. Do not come to the U.S. Consulate.” The US Mission to Saudi Arabia also issued a shelter in place notification for Jeddah, Riyadh and Dhahran.
The Middle East is home to about 10 million barrels a day of refining capacity and diesel prices were soaring on Tuesday. The strait is also a major waterway for liquefied natural gas tankers, with Qatar shutting production at the world’s largest LNG export facility after it was targeted by Iran.
Tuesday also brought more reaction from energy buyers. China — the world’s largest oil importer — called on all sides in the war to ensure the safe passage of ships through Hormuz. Indonesia said it will source part of its crude from the US as an alternative to Middle East shipments.
Oil’s metrics point to growing near-term tightness. Brent’s prompt spread — the difference between its two closest contracts — widened to roughly $2.80 a barrel in backwardation, a bullish pattern. A week ago, the gap was 19 cents.
The impact of the conflict has also ripped through freight markets. The cost of hauling crude oil from the Middle East to China soared to the highest record on Monday, with day rates on the industry’s benchmark route surging to $481,000, according to data from the Baltic Exchange.
Oil Prices
WTI for April delivery was 4.7% higher to settle at $74.56 a barrel in New York.
Brent for May settlement gained 4.7% to settle at $81.40 a barrel.
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