Oil prices extended gains Tuesday as tensions in the Middle East escalated, with the U.S. carrying out new strikes against Iran.
Brent crude futures, the international benchmark, were up 4.5% to $94.52 a barrel. U.S. West Texas Intermediate futures added about 5% to $90.03 per barrel, hitting levels not seen since July 24.
U.S. Central Command confirmed earlier reports on Tuesday that the U.S. “forces began striking Islamic Revolutionary Guard Corps (IRGC) targets in Iran. The strikes follow recent attempted attacks by the IRGC against commercial shipping in the Strait of Hormuz and against American service members deployed to the region.”
A tanker was struck by three unknown projectiles while transiting Hormuz on Monday, according to an incident report from the the U.K. Maritime Trade Operations Centre. The tanker was sailing in the southern shipping lane close to the Omani coast, the UKMTO said, adding that no casualties were reported.
Iran launched an attack on two American bases in Jordan on Monday in retaliation for the U.S. strike on its Larak Island. American forces targeted two Iranian rocket launchers on Larak Island on Sunday, reportedly killing three, saying that Tehran intended to launch rockets carrying sea mines into the Hormuz Strait.
The small island, located in the strait, has been a critical military and shipping control point for Iranian forces, helping them keep a firm grip on vessel traffic through one of the world’s most critical maritime routes.
Iranian President Masoud Pezeshkian told the Shanghai Cooperation Organisation Summit on Tuesday that Tehran would immediately reciprocate if Washington agreed to return to its commitments under the interim deal signed in June, according to the Iranian Student News Agency.
The back-and-forth hostilities marked the first time that the U.S. and Iran traded strikes in over a month.
While neither side appeared to be seeking a return to full-scale war, both signaled they were prepared to respond to further attacks. “We are going to hit them hard,” President Donald Trump told Fox News on Monday, saying that “there will be a response” to Iran’s attacks on U.S. military bases in the region.
Analysts largely view the U.S. strike on Larak Island as an attempt to break a deadlock rather than a shift in strategy. “By hitting the launchers rather than broader Iranian military infrastructure, the U.S. appears to be punishing a specific behaviour rather than, at least for now, broadening its war aims,” said Ali Vaez, deputy program director at International Crisis Group.
“It is enforcing the blockade,” said Jason Brodsky, policy director of United Against Nuclear Iran, adding that the Trump administration’s goal was to further degrade Tehran’s capabilities to mine the Strait of Hormuz, while focusing on economic coercive measures as the midterm elections approach.
Washington has ramped up pressure to squeeze Iran’s already-torn economy with “secondary sanctions” that punish nations and businesses buying Iranian crude oil. U.S. Treasury Secretary Scott Bessent said Monday, on the sidelines of the Group of 20 finance ministers gathering, that Iran was “lashing out kinetically” because the new sanctions were taking a toll on its economy.
Speaking from the Oval Office on Monday, Trump reportedly said Iran’s financial systems, armed forces, and governing body have been largely degraded. “It doesn’t mean we won’t smack them to see what happens,” the president said.
The war, now stretching into its seventh month, has disrupted global energy supplies and sent shock waves through global financial markets.
“This is fundamentally an endurance contest,” said Brodsky, as Trump has demonstrated an “unpredictability” that should concern the Iranians, and Tehran may lash out more aggressively militarily as the economic pressure mounts.
Correction: WTI hit a high not seen since July 24. A previous version misstated the futures contract.
By CNBC