Oil prices increased by over 2% in early trading on Tuesday, recovering some of the losses from the previous session, amid concerns regarding supply as the Strait of Hormuz remains largely closed and U.S. allies have declined requests to deploy warships to assist tankers navigating this crucial passage. Brent futures increased by $2.48, or 2.5%, reaching $102.69 a barrel by 0058, while U.S. West Texas Intermediate crude rose by $2.42, or 2.6%, to $95.92. In the previous session, Brent futures settled 2.8% lower while U.S. West Texas Intermediate crude slid 5.3% after some vessels sailed through the critical waterway. The Strait of Hormuz, a critical juncture for approximately 20% of global oil and liquefied natural gas transactions, has experienced significant disruption due to the ongoing U.S.-Israeli conflict with Iran, which has now entered its third week. This situation has heightened apprehensions regarding potential supply shortages, escalating energy prices, and increasing inflationary pressures.

Numerous U.S. allies rejected Donald Trump’s appeal on Monday to deploy warships for the protection of shipping in the Strait of Hormuz, prompting criticism from the U.S. president, who charged that Western partners displayed ingratitude following decades of support. The risks remain pronounced: “It only takes one Iranian militia to fire a missile or plant a mine on a passing tanker to reignite the entire situation,” noted analyst Tony Sycamore. Iran has requested that India release three tankers that were seized in February, as part of negotiations aimed at ensuring the safe passage of Indian-flagged or India-bound vessels through the Gulf via the Strait of Hormuz, according to sources.

The effective closure of the strait has compelled the United Arab Emirates, the third-largest producer within the Organization of the Petroleum Exporting Countries, to curtail production, leading to a reduction in output by more than fifty percent, according to two sources. In response to escalating energy prices, the leader of the International Energy Agency proposed that member nations might consider increasing oil releases, supplementing the 400 million barrels they have previously committed to withdrawing from strategic reserves. Several banks have adjusted their long-term price forecasts, indicating a possible extended period of supply disruption. Bank of America has revised its 2026 Brent forecast upward to $77.50 a barrel, an increase from the previous estimate of $61.

Similarly, Standard Chartered has adjusted its projection to $85.50, up from $70. BofA stated in a note that its revised perspective encompasses two equally probable scenarios: a swift resolution that reinstates flows by April, positioning Brent around $70, or a prolonged disruption extending into the second quarter that drives prices closer to $85. Israel announced that it has comprehensive plans for a minimum of three additional weeks of conflict, as its military targeted locations throughout Iran overnight.