Brent crude nears $85 a barrel amid renewed hostiles between Washington and Tehran.
Oil prices have surged to their highest level in a month as renewed hostilities between the United States and Iran continued for a third consecutive day, dampening hopes for a return to normality in the Strait of Hormuz.
Brent crude, the primary international benchmark, rose 2 percent on Tuesday, extending an 9.6 percent gain from the previous day.
Brent futures for September delivery stood at $84.91 a barrel as of 03:30 GMT, the highest since June 15.
After easing to pre-conflict levels following the US and Iran’s signing of a memorandum of understanding for peace last month, Brent has risen about 17 percent from its price before the start of the war in late February.
US Central Command on Monday announced a third day of strikes on Iran, saying its forces had targeted Tehran’s ability to attack “innocent civilians and commercial shipping” in the Strait of Hormuz.
Iranian officials said they targeted two oil supertankers in the strait and carried out missile and drone strikes on US military assets in Kuwait and Bahrain in retaliation for the attacks.
Adding to the market volatility, US President Donald Trump said on Monday said the US would reimpose its blockade of Iranian ports and begin charging vessels transit fees as the “guardian” of the critical waterway.
“Crude oil is fast losing its strategic petroleum reserve buffer and a violent repricing up cannot be discounted until the market sees toned-down rhetoric from both parties,” June Goh, a senior oil market analyst at Sparta Commodities in Singapore, told Al Jazeera, referring to the US government’s emergency oil stockpile, which the Trump administration has drawn on to mitigate supply constraints.
After ticking up in recent weeks amid hopes for a permanent peace deal between Washington and Tehran, traffic in the strait has plummeted amid the renewed threat of violence against commercial shipping.
A total of 57 total transits were recorded from Friday through Sunday, a more than 50 percent drop compared to the previous week, according to ship-tracking platform MarineTraffic.
Roughly 130 vessels transited the strait daily before the US and Israel launched their initial strikes on Iran in late February.
“Traffic through Hormuz is grinding to a halt, back to – or even below – our immediate pre-MOU pace,” Rory Johnston, the founder of oil market research firm Commodity Context, told Al Jazeera.
“The oil market has proven extremely patient through this crisis, in large part thanks to an ample stock cushion upon which we were able to draw to blunt the sharpness of the supply shock,” Johnston said.
“Unfortunately, much of that cushion has now been depleted, leaving us much more vulnerable to a re-run of March and April.”
The Trump administration has sought to assure markets that the strait remains open to shipping, despite Iran’s declaration on Sunday that the waterway is closed “until further notice”.
The US Department of Energy said on Monday that 8.5 million barrels of oil passed through the strait the previous day with the assistance of the US military, describing the flow as “consistent with the recent average.”
“The US military will ensure oil flows continue, with or without the Iranians, to keep markets well supplied,” the department said in a statement.
Bart Melek, global head of commodity strategy at TD Securities in Toronto, Canada, said oil prices are likely to rise again substantially amid the resumption of US-Iran hostilities.
“I suspect that a move to $100 is quite possible, should it become apparent that physical shortage risks are real and increasingly likely,” Melek told Al Jazeera.
Brent crude climbs more than 4 percent as Washington and Tehran clash over control of critical waterway.
Sources suggest that the ceasefire can be revived amid a lull in fighting and backroom diplomacy.
Analysts say door to diplomacy still open despite exchange of attacks and threats.
Sunday’s attacks follow three previous days of tit-for-tat strikes between Iran and US as a June ceasefire deal frays.
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