Oil prices increased slightly on Tuesday following reports of a tanker in the Strait of Hormuz being hit by a projectile. However, the gains remained constrained as investors assessed the implications of enhanced Middle East supply in relation to apprehensions regarding increasing production and the global demand forecast. Brent crude futures increased by 28 cents, representing a 0.39% rise, reaching $72.29 per barrel. Meanwhile, U.S. West Texas Intermediate crude saw an uptick of 29 cents, or 0.26%, settling at $68.84 per barrel. Both benchmarks had settled near their pre-Iran war levels on Monday. A southbound tanker was struck by a projectile on its port side approximately 8 nautical miles east of Limah, Oman, igniting a fire, according to the UK Maritime Trade Operations. Fresh uncertainty also emerged after U.S. President Donald Trump stated on Monday that Washington would either reach a deal with Iran or “finish the job,” thereby renewing the threat of military action. The Strait of Hormuz, a vital conduit linking Persian Gulf oil producers to international markets, has seen a partial reopening following a near-total closure amid the US-Iran conflict. A convoy of at least eight vessels linked to Japan has recently traversed the waterway. Although traffic has increased, shipping volumes remain beneath the levels observed prior to the conflict.

The United Arab Emirates raised crude production to over 3.8 million barrels per day in June, marking its highest level since April 2020 and surpassing pre-Iran war figures, following an exceedance of its OPEC+ production quota in May, as per estimates. Meanwhile, the Organization of the Petroleum Exporting Countries and its allies, including Russia, reached an agreement on Sunday to increase output targets by an additional 188,000 barrels per day starting in August. The decision aligns with comparable production escalations declared for June and July. Saudi Arabia has reduced the August official selling price of its flagship Arab Light crude for Asian buyers to $1.50 a barrel below the Oman/Dubai average. The cut was $11 from the previous month, marking the biggest reduction in more than two decades, according to a pricing statement released on Monday by Saudi Aramco. Macquarie Group has significantly revised down its Brent crude price projections for 2026 and 2027, indicating that oil supplies from the Middle East are anticipated to return to normal more swiftly than previously anticipated.

In light of the recent interim peace agreement between the United States and Iran, which has facilitated the resumption of oil shipments from the Persian Gulf, the bank has revised its forecast for Brent crude prices. It now anticipates an average of $77 per barrel in 2026, a decrease from the previous estimate of $89. Its 2027 estimate has been revised downward to $64 a barrel from $74. In a research note, strategists Peter Taylor, Vikas Dwivedi, and others indicated that although various factors may impede the recovery of regional production, producers in the Middle East are expected to restore output at a pace that exceeds current market expectations. Traffic through the Strait of Hormuz has begun to show signs of improvement. U.S. Vice President JD Vance indicated that oil flows have reverted to levels observed prior to the conflict, though he did not furnish any corroborating data. Some experts, however, contend that the waterway will require a more extended period to achieve a complete return to normalcy.

It was stated that the restoration of regular operations would necessitate coordinated vessel movements, the resumption of oil well activities, the repair of damaged infrastructure, and the establishment of agreements regarding de-mining efforts. Several shipowners continue to exhibit hesitance in resuming operations in the Strait of Hormuz and the broader Persian Gulf. Analysts indicated that global oil inventories experienced depletion due to the extended disruption of shipping through the strait, necessitating a period for replenishment. Inventories are anticipated to remain under pressure until further crude supplies from the Gulf commence their arrival in international markets. Last month, Saudi Aramco Chief Executive Officer Amin Nasser cautioned that any extended disruption in the Strait of Hormuz might postpone the restoration of stability to global oil markets until 2027. He stated that prolonged disruptions could impact almost 100 million barrels of oil supply each week. Saudi Aramco holds the position as the largest oil producer globally.