Oil prices rise over 2% amid Iran war supply risks as Hormuz remains shut

Oil prices rose more than 2 per cent on Tuesday, reversing some of the previous session's losses, on worries about supply with the Strait of Hormuz mostly shut and US allies rebuffing ​calls to send warships to help tankers move through the vital waterway.

Brent ​futures jumped $2.74, or 2.7 per cent, to $102.95 a barrel by 0357 GMT, while US West Texas Intermediate crude ‌gained $2.45, or 2.6 per cent, to $95.95.

In the previous session, Brent futures settled 2.8 per cent lower while US West Texas Intermediate (WTI) crude slid 5.3 per cent after some vessels sailed through the critical waterway.

 

The Strait of Hormuz - a chokepoint for about 20 per cent of the world's oil and liquefied natural gas trade - has been largely disrupted by the US-Israeli war on Iran, now in its third week, raising concerns about supply shortages, higher energy costs and rising inflation.

"The risks remain stark: It only takes one Iranian militia to fire a missile or plant a mine on a passing tanker to reignite the entire situation," IG market analyst Tony Sycamore said in a note.

Several US allies rebuffed Donald Trump's call on Monday to send warships to escort shipping ‌through the Strait of Hormuz, drawing criticism from the US president, who accused Western partners of ingratitude after decades of support.

"For now, oil markets are fixated on the duration of the conflict, halted supplies at Hormuz, and eventually the damage this chaos will leave on oil infrastructure in the Gulf," said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Meanwhile, traders said prices were further supported after a fire broke out in the Fujairah Oil Industry Zone after a drone attack during morning trade in Asia, though no injuries were reported.

Middle ​East crude benchmarks have soared to all-time highs, becoming the most expensive oil in the world, with traders blaming ‌the price spike on reduced supply available for delivery.

The effective closure of the strait has forced the United Arab Emirates, the Organization of the Petroleum Exporting Countries' third-largest producer, to shut in production, ​reducing its output ‌by more than half, two sources told Reuters.

Iran has asked India to release three tankers seized in February as ‌part of talks seeking the safe passage of Indian-flagged or India-bound vessels out of the Gulf via the Strait of Hormuz, three sources with knowledge of the matter told Reuters.

To curb rising energy costs, ‌the head ​of the International ​Energy Agency suggested member countries could release more oil, in addition to the 400 million barrels they have already agreed to draw from strategic reserves.

Israel said it has detailed plans for ‌at least three more ​weeks of war as its military struck sites across Iran overnight.