Oil Prices Climb for Third Day as Middle East Conflict Escalates, Threatening Critical Shipping Lanes
March 3 (Reuters) – Global oil benchmarks rose sharply for a third consecutive session on Tuesday, with markets rattled by a significant escalation in Middle East hostilities. A widening conflict involving U.S., Israeli, and Iranian forces, coupled with explicit threats to maritime traffic through the chokepoint Strait of Hormuz, has intensified concerns over the stability of energy supplies.
Brent crude futures, the international benchmark, were up $1.10, or 1.4%, at $78.83 a barrel by 0107 GMT. This follows a volatile Monday session where the contract surged to $82.37—a high not seen since January 2025—before paring gains to settle 6.7% higher. U.S. West Texas Intermediate (WTI) crude also advanced, jumping 74 cents to $71.97 a barrel.
The flashpoint is the Strait of Hormuz, a narrow passage between the Gulf of Oman and the Persian Gulf. On any given day, roughly one-fifth of the world's seaborne crude oil—along with massive volumes of diesel, gasoline, and liquefied natural gas—transits this waterway to reach major consumers in Asia and beyond.
"The calculus for traders has shifted dramatically," said Tony Sycamore, a market analyst at IG. "With no diplomatic off-ramp visible, the Strait effectively closed for business, and Iran demonstrating a clear intent to target regional energy assets, the upside risk to prices only grows the longer this continues."
Tensions boiled over on Monday as Israeli strikes in Lebanon prompted a direct Iranian response. Iranian forces launched attacks on energy infrastructure in Gulf states and, critically, against commercial tankers in the Strait. Iranian media quoted a senior Revolutionary Guards official stating the Strait was "closed" and that any ship attempting passage would be fired upon. This followed reports of a drone strike setting a Honduran-flagged fuel tanker ablaze in the waterway.
The immediate impact has been a virtual halt in traffic. Major shipping firms and insurers are now avoiding the route, canceling coverage for vessels and forcing costly reroutes. The disruption is rippling through refined product markets, with Saudi Arabia shutting its largest domestic refinery after a drone strike. U.S. diesel futures hit a two-year high, while European gasoil contracts also posted significant gains.
Analysts warn the price shock may be sustained. Investment firm Bernstein revised its 2026 Brent price assumption upward from $65 to $80 per barrel on Monday, noting that in an extreme, protracted conflict scenario, prices could spike to a staggering $120-$150.
Reporting by Anushree Mukherjee in Bengaluru; Editing by Christian Schmollinger.
Market Voices: Reactions to the Price Surge
David Chen, Portfolio Manager, Global Energy Fund (Singapore): "This isn't just a geopolitical premium anymore; it's a tangible supply shock. The market is pricing in a significant and lasting disruption. Until there's a credible guarantee of safe passage, volatility will be the only constant."
Sarah Wilkinson, Chief Economist, Atlantic Council (Washington D.C.): "The broader economic implications are deeply concerning. Sustained oil at these levels, let alone higher, acts as a tax on global growth, complicates central bank efforts to tame inflation, and could tip fragile economies into recession."
Marcus Holt, Independent Commodities Trader (London): "It's a predictable mess born of endless escalation. The warnings about Hormuz have been on the wall for years. Now, the world's economy is held hostage because diplomatic channels have completely failed. This isn't just market movement; it's policy failure manifesting in our gas prices and utility bills."
Priya Sharma, Head of Risk Analysis, Maritime Logistics Firm (Mumbai): "Our immediate focus is operational safety and rerouting. The cost of diverting tankers around the Cape of Good Hope is immense, but it's the only responsible choice. This will create massive delays and strain global shipping capacity for weeks, if not months."