Oil prices continued to rise on Wednesday amid uncertainty surrounding a potential US-Iran peace agreement and new assaults on shipping, which heightened concerns over additional supply disruptions in the Middle East. The rise occurred notwithstanding industry data indicating a growth in US crude inventories. Brent crude futures increased by 72 cents, or 0.81%, reaching $89.63, whereas US West Texas Intermediate crude rose by 71 cents, or 0.85%, to $83.91. Both benchmarks closed more than $1 higher on Tuesday, reaching their highest closing levels since July 31. That followed a roughly 5% jump on Monday, when optimism regarding a peace agreement between the US and Iran began to diminish. The latest concerns were prompted by distinct reports from the United States and Yemen’s Iran-aligned Houthis regarding attacks on shipping in the Strait of Hormuz and the Bab el-Mandeb Strait on Tuesday.

Iran’s foremost security official, Mohsen Rezaei, asserted that the Strait of Hormuz would continue to be closed unless Washington concedes to Tehran’s stipulations for concluding the conflict. These encompass the unfreezing of Iranian assets and a resolution to various conflicts throughout the region. Supply concerns have intensified following the announcement that Saudi Aramco has postponed the restart of its 400,000-barrel-per-day Jazan refinery until August 30. The postponement followed the Houthis’ assertion of responsibility for two assaults on the facility on Sunday. The UAE’s ADNOC reported on Friday that 15 of its vessels have been subjected to attacks while transiting the Strait of Hormuz since the onset of the conflict. The dynamics surrounding both Hormuz and Bab el-Mandeb continue to present a significant risk for oil markets.

Even temporary restrictions, or the threat of further attacks, are increasing insurance costs and encouraging ships to adopt longer routes. This is anticipated to maintain pressure on energy flows in the near term. The length of the disruption will be pivotal for the forecast on crude prices. JPMorgan projects that each extra month of disruption may lead to an increase in Brent prices by approximately $7 to $8 per barrel. If the disruption persists for three months, the bank anticipates that average monthly Brent prices will approximate $114 per barrel. Goldman Sachs has similarly cautioned that Brent may escalate to $120 a barrel should shipping disruptions persist thru the Strait of Hormuz, the preeminent oil transit route globally.

Goldman Sachs anticipates that the tensions in the Middle East will ultimately subside in its base case scenario. It anticipates Brent averaging $80 per barrel in the fourth quarter and $75 per barrel in the following year. At the same time, it indicated that risks remain skewed to the upside, as disruptions thru Hormuz and the Red Sea may persist longer than anticipated. “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.