Oil benchmarks advanced by more than 2% in early trade on Tuesday as traders weighed the prospect of prolonged supply disruptions linked to a near shutdown of the Strait of Hormuz and tepid responses from U.S. allies to calls for naval escorts.
By 0058 GMT, Brent futures had climbed $2.48, or 2.5%, to $102.69 a barrel. U.S. West Texas Intermediate rose $2.42, or 2.6%, to $95.92. Those gains reversed part of the slide from the previous session, when Brent ended 2.8% lower and WTI fell 5.3% after some vessels managed to transit the waterway.
Market attention has focused on the Strait of Hormuz because it is a critical chokepoint for global energy flows. The channel accounts for roughly 20% of the world’s oil and liquefied natural gas trade, and its effective closure has raised fresh concerns about supply shortages and the potential for higher energy costs and inflation.
Compounding the disruption, several U.S. allies declined a request from President Donald Trump to deploy warships to escort commercial tankers through the strait. The rebuffs drew criticism from the U.S. president, who accused Western partners of ingratitude after decades of support. The limited willingness among allied navies to provide escorts has left traders more exposed to security-driven supply risk.
"The risks remain stark: It only takes one Iranian militia to fire a missile or plant a mine on a passing tanker to reignite the entire situation," IG market analyst Tony Sycamore said in a note.
Separately, three people with knowledge of the matter said Iran has asked India to release three tankers seized in February as part of discussions aimed at securing the safe passage of Indian-flagged or India-bound vessels out of the Gulf via the Strait of Hormuz.
The disruption has also had direct production effects. The United Arab Emirates, OPEC’s third-largest producer, was forced to shut in output, cutting production by more than half, according to two sources. This reduction in supply has increased pressure on global markets and helped lift prices.
Policymakers and international agencies are considering responses. To ease upward pressure on prices, the head of the International Energy Agency proposed that member countries consider releasing additional oil from strategic reserves beyond the 400 million barrels already agreed for release.
Financial institutions have reacted by lifting longer-term price forecasts to account for the possibility of sustained disruption. Bank of America raised its 2026 Brent forecast to $77.50 a barrel from $61, while Standard Chartered increased its projection to $85.50 from $70.
Bank of America said its updated outlook reflects two equally likely scenarios: one in which a quick resolution restores flows by April and places Brent near $70, and another in which the disruption persists into the second quarter and pushes prices toward $85.
The security backdrop remains tense. Israel said it has detailed plans for at least three more weeks of war as its military struck sites across Iran overnight, a development that contributes to the prevailing sense of uncertainty around supply and regional stability.
With these dynamics in play, markets are balancing short-term transactional developments - such as successful transits in the previous session - against structural shifts in supply that could persist if the strait remains effectively closed. Traders, producers and policymakers will be watching subsequent vessel movements, diplomatic exchanges around seized vessels, and any coordinated releases from strategic petroleum reserves for signs of easing or escalation.