Oil markets are back on edge. Prices surged more than 2 per cent in early trade on Tuesday, as fresh concerns over supply disruptions linked to the ongoing US-Israel conflict with Iran rattled investors and reignited fears of a prolonged energy shock.
Brent crude futures climbed $2.48, or 2.5 per cent, to $102.69 a barrel, while US West Texas Intermediate (WTI) rose $2.42, or 2.6 per cent, to $95.92. The rebound comes after a sharp correction in the previous session, when Brent had slipped 2.8 per cent and WTI plunged 5.3 per cent, reported Reuters.
Strait Of Hormuz Disruption Fuels Supply Anxiety
At the heart of the volatility lies the Strait of Hormuz, one of the world’s most critical oil transit routes. The narrow waterway handles around 20 per cent of global oil and liquefied natural gas trade, making any disruption a major risk to global energy security.
The ongoing war involving Iran has significantly disrupted traffic through the strait, now in its third week. While some vessels managed to pass through recently, the situation remains fragile and unpredictable.
Market participants are increasingly factoring in the risk of supply shortages, which could translate into higher fuel prices globally and renewed inflationary pressure.
Geopolitics Takes Centre Stage
Adding to the uncertainty is the lack of a coordinated global response. Several US allies have reportedly declined calls from US President Donald Trump to deploy warships to escort oil tankers through the strait.
This reluctance has raised concerns about the safety of shipping routes and the potential for further escalation. Analysts warn that even a single incident, such as a missile strike or naval mine, could trigger a sharp spike in oil prices.
Tony Sycamore, an analyst at IG, highlighted the fragile situation, noting that it would take very little to reignite tensions and disrupt flows further.
India Enters The Equation
India has also found itself drawn into the unfolding crisis. According to the report, Iran has asked India to release three tankers seized in February as part of ongoing discussions aimed at ensuring safe passage for Indian-linked vessels through the Gulf.
This development underscores how deeply interconnected global energy logistics have become, with major importing nations like India closely watching the situation.
Production Cuts Add To Supply Pressure
The disruption is already having a tangible impact on output. The United Arab Emirates, the third-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), has reportedly been forced to cut production by more than half due to the constraints on exports.
Such a sharp reduction in supply from a key producer adds another layer of stress to already tight global markets.
To counter rising energy costs, the International Energy Agency (IEA) has indicated that member countries could release additional oil from strategic reserves. This would add to the 400 million barrels already committed, offering some relief if supply disruptions persist.
Banks Turn More Bullish On Oil Prices
Financial institutions are beginning to adjust their outlooks in response to the evolving situation. Bank of America has raised its 2026 Brent crude forecast to $77.50 per barrel from $61, while Standard Chartered has increased its projection to $85.50 from $70.
According to Bank of America, the market now faces two equally plausible scenarios. In one, a quick resolution restores normal supply flows by April, pushing prices back towards $70. In the other, disruptions extend into the second quarter, potentially driving prices closer to $85.
This wide range reflects the high degree of uncertainty currently dominating energy markets.
War Timeline Keeps Markets On Edge
The geopolitical backdrop remains tense. Israel has indicated that it has plans for at least three more weeks of military operations, following overnight strikes across Iran.
As long as the conflict continues, markets are likely to remain sensitive to any developments that could impact oil flows.
What This Means For Consumers And Markets
For consumers, rising oil prices could translate into higher fuel costs, increased transportation expenses, and broader inflationary pressures.
For financial markets, the situation adds another layer of complexity. Elevated oil prices can impact everything from currency movements to central bank decisions, particularly in emerging economies that rely heavily on energy imports.
