Oil markets extended their rally for a second consecutive session on Thursday, as investors priced in a sharpening confrontation between Washington and Tehran that has thrown two of the world’s most critical shipping corridors into jeopardy.
Brent crude futures climbed $1.06, or 1.17%, to $91.80 a barrel by 08:12 GMT, having earlier slumped to a session low of $89.02 before buyers stepped back in. U.S. West Texas Intermediate crude posted more modest gains, adding 39 cents, or 0.46%, to $84.85 a barrel after dipping to $83.21 in early trade.
The intraday swings underscore a market caught between fear of supply disruption and cautious optimism that diplomacy might yet defuse the crisis.
The latest bout of volatility follows a significant escalation overnight. U.S. Central Command confirmed that American forces struck dozens of Islamic Revolutionary Guard Corps targets inside Iran, among them military command centers and drone production facilities in a two-hour campaign that ran from 00:00 to 02:00 GMT.
The strikes came in direct response to Iranian ballistic missile attacks on U.S. installations across the Middle East, marking one of the most intense exchanges since hostilities first flared on February 28.
The confrontation is no longer confined to U.S.-Iran channels alone. On Wednesday, Saudi Arabia joined American forces in striking Iran-aligned paramilitary groups in Iraq, the kingdom’s first public participation in such operations after drone strikes launched from Iraqi territory targeted Saudi oil infrastructure.
The move signals a broadening coalition against Tehran’s regional proxies and raises the stakes for oil infrastructure across the Gulf.
At the heart of the market’s anxiety is the Strait of Hormuz, the narrow waterway through which roughly a fifth of the world’s oil and gas passes daily. It has functioned as the conflict’s central pressure point since February, with every skirmish near its shores rippling instantly through futures markets.
“Until safe passage through the Strait of Hormuz is no longer a gamble, the risk premium in oil is not going anywhere,” said Tim Waterer, chief market analyst at KCM Trade. “Hope for diplomacy is welcome, but the market is pricing the reality of ongoing strikes.”
Yet the picture is not one of uniform paralysis. Iran’s Fars news agency reported that a Qatari LNG tanker, the Al Areesh, transited an Iran-designated corridor within the strait with Tehran’s explicit permission.
Shipping data from Kpler and LSEG showed the vessel, which had loaded its cargo at Qatar’s Ras Laffan terminal between July 4 and 6, successfully cleared the strait overnight on July 29.
The safe passage suggests Iran may still be calibrating its disruption of shipping lanes rather than pursuing a wholesale blockade, a nuance traders are watching closely.
Compounding the pressure on global supply chains, the Bab el-Mandeb strait, the vital link between the Red Sea and the Gulf of Aden, has also become ensnared in the conflict.
Yemen’s Houthi movement, having declared a naval blockade against Saudi Arabia only a week earlier, is now reportedly weighing the imposition of transit fees on commercial vessels navigating the southern Red Sea, according to regional sources briefed on the matter.
Should the group follow through, it would add a second, semi-permanent tax on global shipping already grappling with rerouted vessels and lengthening transit times.
For all the day’s gains, analysts caution that Brent has yet to break decisively above its recent highs and that a sustained rally would require harder evidence of physical supply loss rather than headline risk alone.
“For Brent to break convincingly above recent highs and sustain a move higher, we would need clearer evidence of prolonged physical disruption, either a sustained reduction in flows through Hormuz or confirmed damage to key energy infrastructure,” Waterer said.
That confirmation may already be materializing elsewhere. The Caspian Pipeline Consortium, a crucial artery for Kazakh crude exports to global markets, announced Thursday, via Russia’s Interfax news agency, that it had suspended oil loadings after a drone strike damaged a tanker at its terminal.
The disruption adds yet another thread to a supply picture that is fraying on multiple fronts simultaneously: the Gulf, the Red Sea, and now the Caspian.
Taken together, Thursday’s developments illustrate how a conflict that began five months ago has metastasized from a bilateral U.S.-Iran standoff into a multi-front crisis touching Saudi Arabia, Iraq, Yemen, Qatar, and now the Caspian basin.
With three separate chokepoints under strain Hormuz, Bab el-Mandeb, and the CPC’s Black Sea terminal traders are increasingly treating geopolitical risk not as a temporary spike but as a structural feature of the market until a durable diplomatic settlement emerges.
For now, every tanker that clears a contested strait safely is treated as tentative good news; every drone strike is a fresh reminder of how fragile that passage remains.
WHAT YOU SHOULD KNOW
Oil prices are climbing because escalating U.S.-Iran military strikes are threatening the world’s most vital oil chokepoints, the Strait of Hormuz and Bab el-Mandeb, through which roughly a fifth of global oil flows.
While isolated safe passages (like the Qatari tanker) and hopes for diplomacy offer some relief, the market’s trajectory hinges on one thing: whether physical oil flows through Hormuz face sustained disruption. Until that risk clears, elevated prices are likely here to stay.
