Oil markets reacted sharply to Iran’s threat to impose a maritime exclusion zone across the Persian Gulf, pushing Brent crude futures to nearly $100 a barrel on Tuesday. The November expiry contract climbed 1.8% to $98.79/bbl, briefly surpassing $99/bbl, while U.S. West Texas Intermediate (WTI) futures rose 2.7% to $94/bbl. This follows a prior week’s surge of 9.3% for Brent and 9.7% for WTI, as geopolitical risks intensified after renewed kinetic clashes between Washington and Tehran.
The escalation comes amid a broader decline in Middle East crude exports, down 39% in August compared to pre-conflict levels of 18.5 million barrels per day. Saudi Aramco’s Jazan refinery, operating at 400,000 barrels per day near the Red Sea, was targeted in fresh drone and missile strikes, adding to concerns over refining capacity. Meanwhile, the Strait of Hormuz—critical for ~7 million barrels per day of oil and petroleum products—has become a flashpoint, with both Iranian attacks and U.S. retaliatory strikes disrupting maritime traffic.
U.S. Central Command struck three Iranian oil carriers on Saturday in response to Iranian Revolutionary Guard Corps (IRGC) missile attacks on U.S. Navy warships. Iranian state media later claimed Tehran had targeted six vessels, including three tankers and three U.S. ships, while also alleging the capture of a U.S. autonomous submarine at the Strait of Hormuz entrance. Explosions were reported on Kharg Island, further raising fears of escalation.
Analysts note that while U.S. strikes against Iranian assets remain limited, the ongoing conflict risks prolonged instability. Goldman Sachs raised its December 2026 Brent price forecast to $85/bbl and WTI to $80/bbl, while extending 2027 targets to $80/bbl and $75/bbl, respectively. Crude inventories in the U.S. Strategic Petroleum Reserve fell by 1.2 million barrels in the week of September 4, reaching 285.4 million barrels—the lowest since November 1982. Diesel prices also hit a record $5.90/gallon on Tuesday, reflecting broader supply concerns.
Iranian officials, including Secretary of the Supreme National Security Council Mohsen Rezaee and Speaker Mohammad Bagher Ghalibaf, warned of retaliatory measures, with Rezaee stating Washington had received a ‘clear warning’ from Iran’s new missiles. Ghalibaf emphasized that Iran’s oil and gas infrastructure—shared with Western firms—remains vulnerable, framing the threat as a direct challenge to global energy supply chains. Macquarie’s Peter Taylor highlighted the Strait of Hormuz’s centrality, noting that while oil flows remain within expected ranges, the conflict’s volatility could yet disrupt markets further.
The latest escalation follows a return to kinetic action between the U.S. and Iran since July, with both sides citing each other’s strikes. The U.S. Navy’s reported second wave of attacks on Monday—without confirmed casualties—further underscored the risk of unintended escalation, as vessels remain caught in the crossfire between Iranian weapons and U.S. countermeasures.
