SINGAPORE: Oil prices extended gains Tuesday as the risk of a prolonged conflict in the Middle East grew following Iranian threats of retaliation against any new U.S. attacks on its assets, heightening global supply disruption fears.
Brent crude futures climbed 34 cents, or 0.35%, to $97.34 a barrel by 0000 GMT. U.S. West Texas Intermediate crude rose $1.15, or 1.26%, to $92.63 a barrel.
Brent reached its highest level since July 24 during the previous session as traders continued to price in a risk premium amid escalating tensions around the Strait of Hormuz, a critical transit route for global crude shipments.
Iran warned Monday that energy infrastructure across the Gulf, including U.S. oil and gas interests, remained vulnerable. The warning followed tit-for-tat military strikes over the weekend with no visible progress toward a diplomatic resolution.
U.S. Central Command confirmed that U.S. forces struck three Iranian oil tankers Saturday, including one near Kharg Island, Iran's primary crude export hub. The operation followed strikes by Iran's Revolutionary Guard Corps targeting U.S. warships operating in the region.
"The recent escalation of the Middle East conflict has increased the likelihood of a prolonged standoff, punctuated by calibrated military action by the US and Iran," said Daniel Hynes, an analyst at ANZ. "This could see Persian Gulf supply remain constrained through the rest of 2026."
Hynes added that a full return to pre-war shipping throughput is not expected until late Q1 or early Q2 2027.
Market Outlook
Wall Street firms are adjusting their long-term price projections in response to the extended tensions. Goldman Sachs raised its Brent and WTI price forecasts by $5 to $85 and $80 per barrel, respectively, for December 2026. The bank also raised its 2027 forecasts to $80 for Brent and $75 for WTI, reflecting assumptions that Middle East shipping disruptions will persist into next year.
In a September commodity outlook for financial services platform Marex, analyst Ed Meir noted that crude prices are likely to remain elevated through year-end given the continued conflict and unresolved diplomatic issues.
