Oil prices climb after reported US strike on Iranian island

Oil prices moved higher in early Asian trade on Tuesday following a report that the United States struck Iran's Qeshm Island. Brent crude futures rose 48 cents to reach $105.25 a barrel by 0104 GMT. US West Texas Intermediate crude increased by 47 cents to $96.93 a barrel. These gains followed a drop on Monday when Brent crude had settled $8.66 lower at $104.77 a barrel. The Wall Street Journal cited US officials for the report of the strike on Qeshm Island. Some of those officials described the action as defensive to stop Iran from attacking commercial ships in the Strait of Hormuz. Tim Waterer, the chief market analyst at KCM Trade, stated that the report brought risk premium back into the market and flipped the tone away from diplomacy. Tehran reported on Monday that talks with the US to end the war are ongoing following discussions with Qatari mediators that yielded altered proposals without a breakthrough. Trump raised doubts on Monday about a threatened resumption of strikes and stated a deal could happen. The conflict began in late February and has cut traffic through the Strait of Hormuz, which normally carries about a fifth of global crude and gas supplies. Iranian President Masoud Pezeshkian stated that Supreme Leader Ayatollah Mojtaba Khamenei gave the government certain authorities for peace talks. Meanwhile, the US plans to gather delegations from Ukraine and Russia in Abu Dhabi on November 10 and 11 to discuss ending the war in Ukraine, post-war security, and de-escalation.

Context

Middle East conflicts frequently create sudden shifts in global energy markets due to fears of supply blockages in vital shipping lanes like the Strait of Hormuz. When military activity flares up in the region, oil traders quickly reprice the risk of disruptions, which directly impacts fuel prices worldwide.