Oil prices climbed for a second consecutive session on Tuesday, driven by escalating geopolitical tensions in the Middle East and a lack of coordinated international action to secure the Strait of Hormuz.
The increase recovered some ground after sharp losses on Monday, when the head of the International Energy Agency (IEA) indicated that member countries could release more oil from strategic reserves if necessary. Both major crude benchmarks, Brent North Sea and West Texas Intermediate, rose over 2% to settle near $100 per barrel.
The market pressure follows repeated calls from U.S. President Donald Trump for allies to assist in reopening the key oil shipping chokepoint, which Iran has disrupted. However, responses from European and Asian nations have been hesitant. German Chancellor Friedrich Merz stated the conflict was “not a matter for NATO,” while Britain, Spain, Poland, Greece, Sweden, Australia, and Japan have distanced themselves from the U.S. position. Trump warned that allied refusal would be “very bad for the future of NATO.”
Attacks on energy infrastructure have intensified. Drone strikes targeted major oil fields in the United Arab Emirates and Iraq on Monday. Israel reported a “wide-scale wave of strikes” in Tehran and attacks on Hezbollah in Beirut. Early Tuesday, a drone and rocket attack targeted the U.S. embassy in Baghdad.
A rare positive signal emerged when a Pakistani oil tanker became the first non-Iranian vessel to transit the Strait of Hormuz with its transponder active, according to Marine Traffic. Despite this, the persistent violence prevents a definitive de-escalation in the energy risk premium, according to analysts at Pepperstone.
The surge in crude prices has raised concerns about renewed inflationary pressures, potentially prompting central banks to resume interest rate hikes. Investors are now awaiting a series of monetary policy decisions this week.
Equity markets, particularly in Asia, continued to rally, defying the energy cost spike. South Korea’s KOSPI led gains, rising significantly after a strong performance from chipmakers Samsung and SK Hynix. Markets in Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Taipei, and Manila also advanced. This followed upbeat moves on Wall Street, supported by Nvidia’s forecast of at least $1 trillion in revenue through 2027.
However, market analysts caution that conviction behind the equity rally remains fragile. While the IEA’s readiness to tap reserves and the tanker transit provided temporary support, these developments are not viewed as a lasting solution to the supply risks.
Key Market Figures (Approximate):
- Brent Crude: $102.84 per barrel (+2.6%)
- WTI Crude: $95.77 per barrel (+2.4%)
- Nikkei 225: 54,013.73 (+0.5%)
- Hang Seng Index: 26,224.17 (+1.5%)
- Shanghai Composite: 4,103.72 (+0.5%)
- Dow Jones: 46,946.41 (+0.8%)
- FTSE 100: 10,317.69 (+0.6%)
