Brent crude futures rose by 6 cents to $92.16 a barrel, while U.S. West Texas Intermediate crude increased by 15 cents to $85.12, as investors reacted to the U.S. Treasury's expanded sanctions on Iran. This follows a more than 2% drop in both contracts on Monday due to profit-taking after a recent rally.
The U.S. Treasury Secretary Scott Bessent announced on Monday a new wave of sanctions targeting Iran's economic activities, aiming to pressure Iran to end its conflict with the U.S. These sanctions require countries to cut business ties with Iran or face exclusion from the dollar-based financial system. The exact countries affected and the timeline for these penalties remain unspecified.
In parallel, U.S. Defense Secretary Pete Hegseth stated that military action against Iran remains a possibility, although the U.S. is currently focusing on economic measures. Analysts suggest this approach has somewhat alleviated concerns about potential disruptions to Middle Eastern oil supplies.
Despite these measures, regional tensions persist. An oil tanker was hit by an unidentified projectile near Oman's Ash Shishah on Tuesday, according to the United Kingdom Maritime Trade Operations. Iran continues to assert control over the Strait of Hormuz, a critical passage for about 20% of global oil consumption, and has threatened action against 45 tankers it claims violated its transit rules.
The ongoing U.S.-Israeli conflict with Iran, which began on February 28, has led to significant supply disruptions, prompting countries to tap into their reserves. JPMorgan estimates that each additional month of disruption could increase Brent prices by $7 to $8 per barrel, potentially reaching $114 if the situation persists for three months.
Goldman Sachs has cautioned that Brent could surge to $120 a barrel if disruptions in the Strait of Hormuz continue. However, the bank's base case predicts a de-escalation of Middle Eastern tensions, with Brent averaging $80 a barrel in the fourth quarter and $75 next year.
Background
The U.S. and Iran have been in a state of heightened tension since the conflict began in February, impacting global oil markets. The Strait of Hormuz is a strategic chokepoint for oil transportation, and any disruption there can have significant implications for global supply and prices.
As the geopolitical landscape evolves, investors should monitor the duration of the supply disruptions and any further developments in U.S.-Iran relations, which could significantly impact global oil prices.
