Oil Prices Rally Again as Brent Approaches US$88 on Hormuz Strait Tensions

Global oil prices strengthened again on Tuesday, continuing a surge of more than 5% from the previous session, as fading hopes for a peace deal between the United States and Iran refocused market attention on supply disruption risks. Based on Refinitiv data, Brent crude rose to US$87.95 per barrel, up 0.26% from the previous close of US$87.72 per barrel. Meanwhile, West Texas Intermediate (WTI) stood at US$82.39 per barrel, an increase of 0.32%.

The rally means Brent has jumped 5.27% since Friday’s position of US$83.55 per barrel, while WTI has surged 5.39% over the same period. The price spike is closely linked to developments in the Strait of Hormuz, a critical chokepoint for global energy trade. US President Donald Trump stated that the US Navy had taken control of the strait and was clearing Iranian mines from the strategic waterway.

Market optimism regarding the reopening of the Strait of Hormuz has diminished after Trump demanded that Iran provide compensation for casualties and damage caused during the war, attacks, and protests. According to analysts at Barclays, net exports of crude and refined products through the strait averaged only 3 million barrels per day (bpd) in the week ending 7 August, down from 4.4 million bpd the previous week, tightening physical trade conditions.

Supply risks were further exacerbated by developments in the Red Sea. Saudi Aramco delayed the restart of its 400,000 bpd Jazan refinery until 30 August after Houthi forces claimed two attacks on the facility on Sunday. The combination of these geopolitical tensions has forced the market to reintroduce a risk premium into oil prices, with Brent and WTI still trading below their 29 July levels of US$90.74 and US$84.46 per barrel respectively, but recovering rapidly.