Brent crude neared $85 a barrel Tuesday, hitting a one-month high as renewed hostilities between the United States and Iran raised the real possibility that the Strait of Hormuz, the single most important energy chokepoint on Earth, will remain closed for the foreseeable future.
Brent traded at $84.24 by early morning, up 8.36 percent from Monday’s close of $78.15. West Texas Intermediate surged to $77.10, up 8.24 percent. The gains came after three nights of US strikes on Iranian targets and Trump’s announcement of a renewed naval blockade and a 20 percent cargo fee for Hormuz transit.
The price jump is the latest chapter in an oil crisis that has seen Brent swing from wartime highs above $120 a barrel to cease-fire lows around $71, and back up again as the truce collapsed. Before the war, the strait carried roughly 20 percent of the world’s traded crude oil and natural gas.
“Crude oil is a strong buy at current levels with a near-term target of $95-$100 for Brent,” one market analysis firm told clients Tuesday. “The fundamental setup is unlike anything since the 2022 Ukraine crisis, and arguably more dangerous because the Hormuz chokepoint affects a larger share of global energy flows.”
The scale of disruption is staggering. Persian Gulf crude output has fallen roughly 57 percent below pre-war levels, according to Goldman Sachs research. Qatar’s LNG production is offline. Iraqi fields are shutting. Saudi refineries have been hit. Tanker traffic is halted. Insurance markets are refusing coverage for Gulf transits.
For US households, every $10-per-barrel increase means roughly 25 cents more per gallon at the pump. For Europe and Asia, the hit is sharper, Japan’s Nikkei closed 3.3 percent lower Tuesday, with export-reliant giants Toyota, Panasonic, and Sony among the hardest hit. The Stoxx 600 fell 3.34 percent.
Trump’s admission that the war could extend well beyond a cease-fire removes the one near-term catalyst that could have brought prices lower. OPEC+’s modest production increase of 137,000 barrels per day is irrelevant against the scale of supply disruption. The White House is not tapping the Strategic Petroleum Reserve.
The only thing that could send oil back to $75 is a rapid cease-fire and a reopening of the strait. That scenario appears unlikely. Iran is in mourning after the funeral of its supreme leader, the US is bombing daily, and Trump has appointed himself “guardian” of the strait, with a fee to match.
The oil market is pricing in a long war. It is probably right.