Oil prices climbed during Asian trading on Tuesday as renewed fighting between the United States and Iran heightened concerns over potential disruptions to crude supplies from the Middle East.
By 3:25 pm AEST (5:25 am GMT), Brent crude futures had risen 95 cents, or 1.1%, to $91.44 a barrel, while U.S. West Texas Intermediate (WTI) crude was up $1.15, or 1.3%, at $86.91 a barrel.
Brent and WTI contracts had already gained 2.7% and 2.8%, respectively, in the previous session.
U.S. President Donald Trump on Monday threatened further strikes against Iran following the first direct exchange of attacks between the two countries in a month on Sunday.
The escalation comes after the conflict had recently shifted towards an economic standoff.
ANZ analysts said in a note to clients:
"Crude oil prices surged on the prospect of supply disruptions continuing for the foreseeable future as the U.S. and Iran escalated attacks on each other.
"U.S. Central Command said it fired on Islamic Revolutionary Guard Corp forces after spotting them preparing to deploy mines into the Strait of Hormuz. Iran retaliated with a missile and drone attack on U.S. air bases in Jordan.
"The UAE said it dealt with a drone coming from Iran over the country’s territorial waters. Officials from both sides are now preparing for the conflict to drag on for months as talks are deadlocked.
"Earlier in the day, Iran media reported an unidentified supertanker had hit two mines, although this was dismissed by U.S. Central Command.
"The U.S. reiterated that it had removed all Iranian mines from international shipping lanes in Hormuz. The U.S. has ratcheted up its economic campaign on Iran. It is maintaining a naval blockade of Iran’s ports, which has significantly curbed the nation’s oil exports.
"Despite satellite tracking firms suggesting oil flowing through Hormuz is around 6mb/d, that is well below pre-conflict levels.
"In the meantime, the buffers the global oil market has been relying on are becoming exhausted. U.S. inventories are nearing minimum levels, while China’s ability to keep imports low will be tested as seasonal demand picks up."
The number of visible commodity vessels transiting the Strait of Hormuz remained at five per day on Monday, below the 10-day average of around 14, according to Reuters, citing shipping data from Kpler.
Meanwhile, the United Kingdom Maritime Trade Operations agency (UKMTO) said on Tuesday that a tanker reported being struck by three projectiles while sailing out of the Strait of Hormuz.
No casualties or environmental impacts were reported.
