Oil prices continued to rise for a second consecutive session on Tuesday, building on a more than 5% increase on Monday. The diminishing prospects of a US-Iran agreement to resolve the conflict and reopen the Strait of Hormuz have contributed to prices remaining close to their highest levels in over a week. Brent crude futures remained unchanged at $88 a barrel, reflecting a slight increase of 0.35%. Meanwhile, US West Texas Intermediate crude futures were priced at $83.50, marking an uptick of 0.40% per barrel. Both benchmarks surged over 5% on Monday, reaching their peak levels since July 31. The rally followed US President Donald Trump’s response to Iran’s conditions for a peace deal, wherein he demanded compensation from Tehran for individuals who lost their lives in wars, attacks, and protests.
The demand is anticipated to complicate efforts to reopen the Strait of Hormuz. Trump later stated that the US had established control over the strait and had successfully removed Iranian mines from the strategic oil waterway. Concerns regarding supply were further exacerbated by recent developments in Saudi Arabia. Saudi Aramco has delayed the restart of its 400,000-barrel-per-day Jazan refinery to August 30 following claims of responsibility by the Houthis for two attacks on the facility on Sunday. The UAE’s ADNOC reported on Friday that 15 of its vessels have been targeted while navigating the Strait of Hormuz since the onset of the conflict.
The risks surrounding both the Strait of Hormuz and the Bab el-Mandeb continue to be substantial. Even temporary restrictions or the threat of further attacks are maintaining elevated insurance costs and compelling vessels to adopt longer routes, which is expected to sustain constrained energy flows in the near term. The duration of the supply disruption will be pivotal in determining the trajectory of oil prices. JPMorgan posits that each supplementary month of disruption may contribute approximately $7 to $8 per barrel to Brent prices. If the disruption persists for three months, the bank anticipates average monthly Brent prices to approximate $114 per barrel. Goldman Sachs has cautioned that Brent may rise to $120 a barrel if shipping disruptions thru the Strait of Hormuz, the preeminent oil transit route globally, continue.
Goldman’s base case posits that tensions in the Middle East are likely to subside over time. Under that scenario, it anticipates Brent to average $80 a barrel in the fourth quarter and $75 a barrel in the following year. The bank also indicated that risks are tilted toward the upside due to the potential for extended disruptions in the Strait of Hormuz and the Red Sea. “The direction of our outlook is unchanged; the path and the timeline have shifted. We still expect oil to cool as we move into 2027, for three reasons: supply outside the conflict zone is expanding, with OPEC+ raising production targets, the UAE at record output and non-OPEC barrels responding to price,” said Anindya Banerjee.
