Crude Nears $100 a Barrel as U.S.-Iran Standoff Tightens Grip on Gulf Shipping
Brent crude traded at a seven-week high of $99 per barrel Tuesday morning, extending an oil-market rally that has refused to fade as Washington and Tehran remain locked in a standoff over the Strait of Hormuz. The international benchmark was hovering near $97 a barrel in New York trading Monday evening, while West Texas Intermediate, the U.S. standard, climbed above $92 a barrel for October delivery.
Oil prices have been elevated since the U.S.-Israeli strikes on Iran in February, and the latest escalation has erased any lingering hopes of a quick return to normal shipping in the Gulf. For traders, the risk is no longer hypothetical: the strait, a vital artery for global crude supplies, has become a military flashpoint where tanker movements can be stopped, boarded or attacked at short notice.
The most recent jump in prices followed U.S. Central Command’s announcement that it had “permanently disabled” three Iranian oil tankers in the Persian Gulf and the Gulf of Oman. Central Command chief Adm. Brad Cooper framed the operation as a direct answer to Iranian attacks on American warships. “If you shoot at two of our ships, we will impose an even higher economic cost — taking out three of yours,” he said in a statement.
Iran’s leadership responded with its own escalation. Mohsen Rezaei, secretary of the Supreme National Security Council, said Tehran plans to announce a maritime “exclusion zone” outside the Strait of Hormuz for vessels seeking to pass without Iranian permission. He gave few specifics but said the zone would run from the line of the U.S. naval blockade toward the strait and into the Persian Gulf.
Parliament Speaker Mohammad Bagher Ghalibaf went further, saying Tehran had moved past the stage of calibrated responses. “The Americans must have understood that the era of proportionate responses has come to an end,” he said in remarks carried by state media. “Any aggression against Iran’s interests and security will receive a faster, more intense and more painful response.”
The confrontation has already taken a visible toll on shipping. Traffic through the Strait of Hormuz has dropped to its lowest level since May, according to ship-tracking data from analytics firm Kpler cited by Reuters. Sunday’s 10-day average was 10 vessels per day, down from 13 on Saturday and more than 15 on Friday. Only two ships passed through the strait on Saturday, and six on Sunday, most using the Iranian route.
The U.S. military, meanwhile, said it had redirected 94 commercial ships that tried to breach the blockade of Iranian ports ordered by President Trump. That was up from 92 a day earlier. Three vessels had been disabled and two had been boarded.
The danger is not limited to the strait itself. Oman’s Maritime Security Center said Monday that its navy had evacuated 16 crew members from a Saudi-flagged oil tanker attacked by Iran in the Strait of Hormuz a week earlier. Saudi Arabia’s national shipping firm confirmed that two Filipino sailors on the vessel were killed in the attack.
For American motorists, the effect is now visible at the pump. AAA said the national average price for regular gasoline stood at $4.15 a gallon Monday, nearly a dollar above this time last year and higher than the previous Labor Day record of $3.82 set in 2012. President Trump predicted Monday night that “oil prices will drop precipitously, like everything else is dropping (but more!), when we WIN the war with Iran.” Similar predictions have not stopped the market from grinding higher over recent weeks.
Inside Iran, the war economy is creating new pressure on ordinary households. State media reported Tuesday that Iran has raised gasoline prices for its heaviest users, the second increase since December. The new system means anyone buying more than the monthly quota of 110 liters must pay 100,000 rials per liter — roughly 7 cents — or double what they had been paying. Government officials said the extra revenue would be returned to households, and that the new rate would affect about 15 percent of consumers.
Gasoline in Iran remains heavily subsidized, but the increase adds to the strain of a currency at record lows and rising living costs. The U.S. dollar was trading at 2.22 million rials on Monday. Tehran avoided direct mention of the war in announcing the fuel change, pointing instead to the “current situation.” The Iranian leadership knows how explosive such moves can be: an increase in 2019 triggered nationwide protests and a crackdown that reportedly killed more than 300 people.
The fuel squeeze is also a supply-side problem. Iran’s state oil distribution company said domestic gasoline consumption set a record in August at 145 million liters per day, while domestic production capacity stood at 122 million liters per day. The shortfall requires imports, leaving Iran more exposed to sanctions and disruptions at a time when its own exports are being targeted.
Yemen and the Red Sea Front
The conflict has also spread to the southern entrance of the Red Sea, where Yemen’s Iran-backed Houthi rebels are pressing an offensive along the coast toward the Bab al-Mandab Strait. A Saudi-led coalition said Tuesday that Houthi strikes on Saudi territory wounded 73 people, and vowed to respond. Houthi media claimed the rebels had hit Abha International Airport, King Khalid air base and facilities belonging to state-owned oil giant Aramco in Abha and Jizan.
The Bab al-Mandab waterway is a strategic route for Saudi oil exports and has become even more important during the standoff in the Gulf. Days of fighting along the Red Sea coast have left more than 300 people dead and displaced hundreds of families as the rebels try to seize territory near the strait.
There is also a rising humanitarian toll inside Yemen. Houthi-affiliated media said Saudi airstrikes on a prison in the northern city of Al-Hazm killed seven people, including a child, and wounded seven others. Footage shared by the group showed smoke rising from the blast site as rescue workers searched through rubble. The accounts could not be independently verified.
Gulf Diplomacy at a Crossroads
The crisis is forcing Gulf states to rethink their security assumptions. Qatar’s foreign ministry spokesman, Majed Al Ansari, said Monday at the Hili Forum in Abu Dhabi that the war had exposed the limits of relying solely on Washington. “We need our partners and allies, but we cannot rely on them alone for our security,” he said. Qatar was hit repeatedly by Iranian retaliation at the height of the fighting.
Emirati diplomatic adviser Anwar Gargash struck a similar theme, saying Gulf countries had failed to respond to Iran’s attacks with a unified strategy. He argued that engagement with Iran is unavoidable but that rebuilding trust is another matter. “Geography leaves us no alternative to engagement, but we must distinguish clearly between rebuilding a necessary and functional relationship with Iran and rebuilding the trust that has been broken,” Gargash said.
Iran is separately pursuing a channel with Oman, which sits on the other side of the strait. Foreign ministry spokesman Esmaeil Baghaei said Monday that talks with Oman on the future of the waterway had reached their “final stage” and that an understanding on a temporary safe route would be registered with the International Maritime Organization in the coming days. The idea of transit fees has surfaced during those discussions, a notion Washington has rejected.
Iran also warned South Korea on Monday not to participate in U.S. military operations around the Strait of Hormuz, saying any deployment would be considered “direct support for the party responsible for that aggression” and would carry “serious consequences.” South Korea said Friday it was considering involvement in naval operations, but stressed that no final decision had been made.
Wider Regional Fallout
The war has also complicated efforts to address Iran’s nuclear program. Rafael Grossi, director general of the International Atomic Energy Agency, said Monday that Iran has refused to engage with inspectors while it waits for a broader political agreement. “We do not subscribe to this logic,” Grossi said, stressing that Iran’s obligations under the Nuclear Non-Proliferation Treaty do not disappear. “The best, shortest way for a positive outcome is for Iran to engage with us.”
Beyond the Gulf, cross-border violence continued to simmer in southern Lebanon. The Israeli military said it struck Hezbollah infrastructure sites after what it called threats to Israeli troops, including two explosive drones launched toward its forces. Lebanon’s health ministry reported 12 people killed in overnight strikes. In the town of Kfar Rumman, local media said an Israeli airstrike destroyed a building and killed at least 11 people. Residents who had returned after a June truce described living in constant fear. “We’ve lived in fear since coming back,” one resident, Fouad Chakaron, told AFP.
Lebanese President Joseph Aoun condemned the attacks, saying Israel’s actions amount to “condemned, rejected and unjustifiable crimes” and undermine international efforts to stop the escalation. The Israeli military said it remained committed to the ceasefire but would continue to “remove threats” from Hezbollah.
The oil market, meanwhile, remains hostage to the same pattern of retaliation and counter-retaliation. Brent has not settled below the psychological threshold for weeks, and analysts say the path back to more orderly trade depends less on diplomacy than on whether either side can afford to back down. With Iran threatening a new exclusion zone and Washington enforcing a naval blockade, the shipping lanes that carry a large share of the world’s oil have become the center of a broader confrontation with no clear exit.