Oil prices advanced on Tuesday as concerns over potential supply disruptions in the Middle East outweighed worries about weaker global demand.
Brent crude futures rose 0.8% to trade near $84.80 per barrel, while U.S. West Texas Intermediate (WTI) futures climbed 0.7% to around $81.20. The gains followed reports that U.S.-Iran peace negotiations had stalled, raising the risk of further regional instability that could impact oil shipments through critical chokepoints such as the Strait of Hormuz.
Analysts noted that while demand concerns persist amid economic slowdowns in major economies, the immediate supply risks from geopolitical tensions are outweighing those concerns. "The market is pricing in a higher risk premium due to the uncertainty around Iran and potential disruptions," said a senior analyst at a major commodities brokerage.
The upward momentum in oil prices also reflects broader concerns about underinvestment in new production capacity, which could tighten supplies in the medium term. OPEC+ has maintained its gradual production increases, but the group’s spare capacity remains limited, leaving the market vulnerable to sudden supply shocks.
Investors are closely monitoring developments in the Middle East, where any escalation in tensions could lead to a more pronounced spike in prices. Meanwhile, economic data from China, the world’s largest oil importer, continues to signal soft demand, adding a counterbalance to the upward price pressure.
The Federal Reserve’s policy stance and its impact on the U.S. dollar, which typically moves inversely to oil prices, is also a key factor to watch. A weaker dollar could further support oil prices by making crude cheaper for buyers holding other currencies.
For now, the market remains finely balanced between geopolitical risks and macroeconomic headwinds, with traders awaiting further clarity on both fronts.
