Oil prices jumped over 4% on Tuesday as the conflict between Iran and Israel escalated, stoking fears of disruption in the Middle East. Brent crude settled at $76.45 a barrel, up $3.22 or 4.40%, while WTI closed at $74.84, gaining $3.07 or 4.28%. Though no major oil flows have been interrupted, Iran partially shut down gas production at its South Pars field following an Israeli strike, and tensions rose after a tanker collision near the Strait of Hormuz.
Analysts say the market is reacting to the growing risk of a prolonged conflict, similar to the Russia-Ukraine war, with a “security premium” now built into prices. Still, some downplayed the likelihood of the strait being closed, noting that both Iran and the U.S. have reasons to avoid disrupting global oil trade.
Meanwhile, the International Energy Agency slightly lowered its global demand forecast and raised its supply estimate, but this had little effect on the day’s bullish sentiment. Investors were also watching for signals from the U.S. Federal Reserve ahead of a key interest rate meeting.