Oil prices extended their advance on Tuesday as fading hopes for a US-Iran settlement and another shipping incident in the Strait of Hormuz put global supply risks back at the centre of the market.
Brent crude climbed above $91 a barrel, its strongest level since late July, while West Texas Intermediate approached $85 after touching $85.37 earlier in the session.
Both benchmarks are extending Monday’s sharp gains as traders reassess how quickly Middle East oil flows can normalise.
Hormuz disruption is putting Brent back above $90
The latest move is being driven less by US-specific fundamentals and more by the deteriorating security picture around two crucial global shipping routes.
Iran has warned that it could adopt a more aggressive military posture after efforts to reach a permanent agreement with Washington stalled.
The US has also ruled out extending the temporary ceasefire arrangement reached in June.
Shipping data underline why traders remain nervous.
Only six commodity vessels crossed Hormuz on Monday, still well below the recent 10-day average of 11. No very large crude carriers or LNG tankers were recorded passing through the strait.
The risk intensified on Tuesday after UK Maritime Trade Operations reported that a vessel leaving the strait was struck by an unidentified projectile, damaging its engine room and causing a crew casualty.
KCM Trade analyst Tim Waterer sees the lack of progress between Washington and Tehran, combined with very limited shipping activity, as keeping a significant supply premium embedded in crude.
He also views simultaneous risks around Hormuz and the Bab el-Mandeb as central rather than peripheral threats to oil supply.
Tight inventories amplify the geopolitical premium
The broader physical market gives those risks more weight.
The US Energy Information Administration estimates that oil and petroleum-liquid flows through Hormuz averaged just 4.9 million barrels a day in the second quarter, compared with 21.6 million before the conflict.
It also estimates global inventories could fall by 3.8 million barrels a day during the third quarter as disrupted Gulf production continues to bite.
The International Energy Agency has also cut its 2026 global supply outlook, forecasting production to decline by 4.3 million barrels a day this year.
Gulf output remained 8.3 million barrels a day below normal levels in July.
That helps explain why Brent is responding more strongly than WTI. The international benchmark carries greater direct exposure to disruptions in seaborne Middle East supply.
Weaker demand could still cap the rally
Supply fears do not automatically mean oil is heading back towards the extreme highs seen earlier in the conflict.
High fuel prices have already damaged consumption, while the EIA expects global oil use to decline in 2026.
Its base case assumes Hormuz traffic gradually improves, allowing Brent to average around $85 in the third quarter before falling towards $78 in the fourth.
That leaves crude caught between two powerful forces. Continued attacks or a deeper breakdown in diplomacy could keep Brent above $90 and pull WTI higher.
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