West Texas Intermediate (WTI) oil prices extended gains for a second consecutive day, trading around $79.60 per barrel during Asian hours on Tuesday, driven by mounting supply anxieties following a sharp escalation of geopolitical hostilities in the Middle East [1]. The US, under President Donald Trump, reinstated a naval blockade targeting Iranian vessels and customers transiting the Strait of Hormuz, and announced a 20% reimbursement fee for all other commercial cargo passing through the strategic waterway [1][2][3]. Trump stated that the US must be financially compensated for its military efforts to secure the volatile chokepoint, specifically referencing regional nations such as Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, and Kuwait [1][3].
The aggressive maritime measures followed a fresh wave of tit-for-tat military exchanges between Washington and Tehran. The US launched strikes against Iran for a third consecutive night, aiming to degrade Tehran's capacity to attack shipping in the Strait of Hormuz [2]. Iran retaliated by targeting American allies across the Gulf, including missile attacks on two Emirati oil tankers, Mombasa and Al Bahiyah, in the strait's southern lane within Omani territorial waters [1][2]. The attack killed one Indian crew member aboard the Mombasa, injured eight others, and caused material damage to both tankers [2]. Bahrain, home to the US Navy's Fifth Fleet, also came under renewed attack, with missile-alert sirens sounded early Tuesday [2].
The escalation has led to significant market reactions. Brent crude rose 2% to $85 a barrel on Tuesday, while US West Texas Intermediate climbed 2.3% to $80, with oil prices jumping over 9% on Monday—their biggest daily gain since 2020—following Trump's decision to reinstate the Iran blockade [2][3]. War risk premiums for the Strait of Hormuz are expected to increase sharply, as shipowners and charterers have paused decisions to transit through the waterway [2]. Confirmed crossings through Hormuz declined by around 52% week on week over July 10 to 12, with traffic reverting to more defensive routing patterns [2].
The strikes have unraveled the ceasefire following the interim US-Iran agreement signed last month, which aimed to reopen the strait and pause hostilities for 60 days of negotiations [2]. Market sentiment remains highly risk-averse, with traders and investors reacting to the heightened uncertainty. US benchmark indexes fell overnight, with the S&P 500 down 0.8%, Nasdaq Composite dropping 1.6%, and the Dow declining by more than 100 points, or around 0.3% [3]. Asian markets also opened lower amid the risk-off mood [3].
President Trump also stated support for a Russian sanctions bill, originally championed by the late Senator Lindsey Graham, aiming to renew and intensify penalties against international buyers of Russian oil and natural gas [1].
CONCLUSION
The escalation of US-Iran tensions and the reinstatement of the Hormuz blockade have triggered a sharp surge in oil prices and heightened risk premiums, with significant disruptions to shipping and global energy markets. Equity markets responded negatively, reflecting investor concerns over geopolitical instability and supply risks. The situation remains fluid, with ongoing military actions and uncertainty over future negotiations.