Futures for Brent and West Texas Intermediate crude each rose by nearly 0.8% on Tuesday, extending a gradual upward trend as supply disruption risks in the Strait of Hormuz and Bab al Mandab Strait persisted.
Vessel transit through the Strait of Hormuz fell to six ships on Monday, below the ten-day average of 11 vessels, according to Kpler data cited by Reuters. The United Kingdom Maritime Trade Operations reported a vessel was targeted in the strait, while Iran launched two ballistic missiles aimed at navigation in the area, according to the United Arab Emirates.
The absence of a U.S. response contrasts with prior escalations, such as the two-week wave of tensions that followed Iran’s targeting of three ships in the strait after the collapse of a memorandum of understanding. Analysts suggest the current restraint reflects a temporary U.S. inclination to avoid escalation, potentially extending beyond the midterm elections. Reports indicate President Donald Trump preferred to discard the memorandum due to its concessions to Iran while avoiding broader military action ahead of critical elections in the U.S. and Israel.
U.S. gasoline prices have remained stable above $4 per gallon despite the geopolitical backdrop, according to AAA Fuel Gauge data. Long-term Treasury yields have also climbed, with the 10-year yield near 4.7% and the 30-year yield at 5.3%, the latter the highest since 2007. Elevated yields limit the market’s capacity to absorb further energy price shocks, which could push borrowing costs higher amid persistent energy-driven inflation.
The prolonged state of "no war, no peace" sustains a geopolitical risk premium in crude prices, preventing a sharper decline. Prolonged tensions increase the risk of miscalculation and unintended escalation, which could disrupt energy supplies through targeted attacks on ships or infrastructure. The reactivation of the Yemen conflict illustrates how the gray zone between war and peace can persist without a comprehensive settlement.
Analysts warn that the current equilibrium remains fragile, with potential for supply disruptions to intensify if regional tensions escalate further.
