Brent crude oil prices surged toward the $100 mark on Tuesday, climbing 3.6% to $99.64 per barrel, as new U.S. airstrikes in southern Iran dashed hopes for a swift diplomatic resolution and kept the strategically vital Strait of Hormuz partially closed. The escalation has reintroduced significant supply risk premiums into the market, reversing recent optimism over a potential peace deal.
West Texas Intermediate (WTI) crude, the U.S. benchmark, traded down 3.7% at $93.09 per barrel, though Monday's settlement was absent due to the U.S. Memorial Day holiday. The divergence between the two benchmarks underscores the Strait of Hormuz's outsized influence on global pricing, as Brent directly reflects the disruption to Middle Eastern supply routes.
The U.S. Central Command confirmed that Monday's strikes targeted mine-laying boats and missile launch areas, characterizing them as defensive measures. U.S. Secretary of State Marco Rubio indicated that negotiations with Iran might still require "a few days," leaving market participants in a state of cautious uncertainty.
The Strait of Hormuz remains the core driver of price action. According to the U.S. Energy Information Administration, more than a quarter of all seaborne oil traversed this chokepoint in 2024 and early 2025, accounting for roughly one-fifth of global oil and petroleum product demand. Even limited disruption here has outsized effects on global supply chains.
Brent's bounce follows a 7% drop in the prior session as traders had priced in accelerating peace talks. Giovanni Staunovo at UBS noted that "flows through the Strait remain restricted," while Ole Hansen at Saxo Bank warned that any reopening would likely be "gradual," even if a deal is reached. Tony Sycamore at IG cautioned that a deal could "collapse at the 11th hour."
Some signs of easing emerged: ship-tracking data showed three liquefied natural gas (LNG) tankers successfully passed through the Strait of Hormuz in recent days. Additionally, a very large crude carrier loaded with Iraqi Basrah crude, stuck for nearly three months, is now en route to China. However, traders remain wary, with overall oil flows still constrained.
The physical oil market is already feeling the strain. Indian refiners cut crude processing by 8.9% in April, falling to 5.23 million barrels per day, as they shifted purchases to Latin America and Africa to compensate for disrupted Middle Eastern supplies. India, the world's third-largest oil importer and consumer, is a key barometer of global demand shifts.
Market sentiment remains unsettled. Peter Schaffrik at RBC Capital Markets described the Middle East situation as "not entirely clear," highlighting how quickly investor sentiment swung from deal optimism to renewed bombing concerns. The International Energy Agency's recent note emphasized that resuming exports through Hormuz is the critical factor for energy supply, prices, and the global economy, noting that oil is now moving less like a normal commodity and more on diplomatic and shipping headlines.
The dual risks are stark: a genuine deal reopening the strait could trigger a sharp selloff in crude, especially given the recent rally. Conversely, renewed military conflict, prolonged talks, or a slow reopening would keep supply tight, fueling higher fuel costs, freight rates, and inflationary pressures across the global economy.
