Global oil markets climbed on Tuesday as escalating geopolitical tensions in the Gulf region tightened supply expectations, with prices rallying amid persistent disruption to critical energy routes and conflicting signals over potential diplomatic resolution.
Brent crude futures climbed 4.62 per cent to $104.56 per barrel, while U.S. West Texas Intermediate (WTI) rose 5.04 per cent to $92.57, underscoring renewed volatility in energy markets already strained by weeks of conflict involving Iran, Israel, and the United States.
At the centre of the market upheaval is the effective closure of the Strait of Hormuz, a vital maritime corridor through which roughly one-fifth of global oil and liquefied natural gas supplies typically pass. The disruption has been described by the International Energy Agency as the largest oil supply shock on record, fundamentally reshaping short-term market dynamics.
Analysts say the persistence of the disruption, rather than the intensity of daily price movements, is now the primary driver of oil markets.
“The reality on the ground is unchanged. The Strait of Hormuz remains effectively closed and supply disruptions linger, tightening the market,” said Nikos Tzabouras, an analyst at Tradu.com.
With shipping routes constrained and inventories under pressure, traders are increasingly pricing in the risk of prolonged supply deficits, reversing earlier expectations of a well-supplied market in 2026.
Kenny Zhu, research analyst at Global X, noted that “global energy forecasts are recalibrating from supply gluts into potential deficits,” highlighting a fundamental shift in sentiment as the conflict enters a more protracted phase.
Despite a temporary reprieve earlier in the week, markets remain sceptical about the prospects for a near-term diplomatic resolution.
Donald Trump had indicated that a deal with Iran could be within reach, even ordering a five-day delay on planned military strikes targeting Iranian energy infrastructure. That announcement triggered a brief sell-off in oil prices, with crude futures falling more than 10 per cent on Monday.
However, Tehran has firmly denied engaging in negotiations, dismissing claims of talks as unfounded and reinforcing market concerns that the conflict may persist.
“We’re definitely getting mixed signals. The market is pricing in worries that these talks aren’t going to go well and that the war is going to continue,” said Phil Flynn, senior analyst at Price Futures Group.
Further complicating the outlook, Iran’s negotiating stance has reportedly hardened since the outbreak of hostilities, with officials expected to demand significant concessions before engaging in any substantive dialogue.
On the ground, hostilities continue to escalate. Iran launched fresh missile strikes into Israel on Tuesday, while attacks on energy infrastructure within Iranian territory; including facilities in Isfahan and Khorramshahr, have heightened fears of broader disruptions to regional production capacity.
The intensifying conflict has raised the risk that what began as a regional crisis could evolve into a sustained global energy shock, with implications for inflation, growth, and monetary policy worldwide.
Pakistan has stepped forward as a potential mediator, offering to host talks between Washington and Tehran, though analysts remain cautious about the likelihood of meaningful progress in the near term.
With the Strait of Hormuz effectively constrained, market participants are increasingly bracing for a prolonged period of tight supply conditions.
Analysts at Macquarie have warned that if the disruption persists through April, Brent crude could climb as high as $150 per barrel, surpassing the all-time peak of $147 recorded during the 2008 oil crisis.
