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Oil prices jumped again in Asian trading on Wednesday, extending a powerful rally after two days of sharp gains, as escalating tensions between the United States, Israel, and Iran kept fears of supply disruptions firmly in focus.
By 01:31 ET (06:31 GMT), Brent crude futures rose 2.7% to $83.62 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 2.5% to $76.39 a barrel.
Both benchmarks had already climbed nearly 5% on Tuesday, with Brent briefly surging above $85 a barrel, its highest level since July 2024. Since the conflict began, oil prices have jumped more than 15%, reflecting a rapidly rising geopolitical risk premium.
Hormuz tensions keep supply fears elevated
The crisis erupted over the weekend when U.S. and Israeli forces launched coordinated strikes on Iran’s military infrastructure, killing Supreme Leader Ayatollah Ali Khamenei.
Hostilities have continued to escalate, with additional strikes targeting Iranian-linked facilities on Tuesday. Tehran responded by ramping up military activity across the Gulf and issuing warnings to international shipping companies.
Iran has also targeted oil tankers passing through the Strait of Hormuz, the narrow maritime corridor responsible for roughly 20% of global oil shipments. Iranian officials warned that any vessel attempting to cross the strait could be attacked.
The threat to Hormuz — a critical export route for major producers including Saudi Arabia, Iraq, and the United Arab Emirates — has injected a significant geopolitical premium into global oil prices.
Analysts at ING noted that the disruption risk may already be affecting upstream supply.
“The disruption to oil flows through the Strait is starting to affect production further upstream,” ING said in a research note.
Reports indicate that Iraq has begun shutting down output at the Rumaila field and the West Qurna 2 field, its largest production sites, potentially taking about 1.2 million barrels per day offline.
U.S. Navy may escort tankers
Oil markets pared part of their earlier gains on Tuesday after U.S. President Donald Trump said the U.S. Navy could escort commercial vessels through the Strait of Hormuz if necessary, while pledging government support to ensure safe passage.
The announcement came as insurance companies began canceling war-risk coverage for ships operating in the region, raising concerns about disruptions to maritime transport.
ING analysts said the proposed security guarantees could eventually stabilize shipping flows, but cautioned that implementation would take time.
“Such assurances are welcome, but clearly they will not happen overnight,” the bank said.
While ongoing military escalation continues to support oil prices, markets may see some moderation if international efforts to secure shipping lanes prove effective. For now, however, traders remain highly sensitive to developments in the Gulf, leaving oil markets vulnerable to further volatility.
