Brent and WTI crude prices moved higher on Tuesday as traders reassessed the risk of renewed escalation between the United States and Iran, with attention focused on unresolved peace talks and the Strait of Hormuz.
Oil prices rose again on Tuesday as uncertainty over the fragile ceasefire between the United States and Iran renewed concerns about supply disruption in the Middle East.
Brent crude, the international benchmark, climbed above $106 per barrel, while US West Texas Intermediate moved back above $100 per barrel in morning trading. The rise followed gains on Monday, when both benchmarks closed almost 3 per cent higher after US President Donald Trump said the ceasefire with Iran was “on life support”.
The price movement reflected a change in market expectations. Earlier optimism that Washington and Tehran could reach a settlement has weakened as talks remain unresolved. Reuters reported that disagreements continue over several points, including the cessation of hostilities, the lifting of a US naval blockade, the resumption of Iranian oil exports and compensation for war damage.
According to Trading Economics, Brent crude rose on 12 May as investors continued to price in the risk of a prolonged conflict. The same data showed WTI crude also gaining, with both benchmarks supported by concerns that the ceasefire may not hold.
The central concern for energy markets remains the Strait of Hormuz, the narrow waterway linking the Gulf with global shipping routes. Any renewed threat to commercial traffic through the strait would affect one of the world’s most important routes for crude oil and liquefied natural gas. Even without a complete closure, higher insurance costs, rerouting and delays can raise the cost of supply.
Analysts cited by Reuters said a failure to reach a peace agreement by the end of May would increase the risk of further price rises. Suvro Sarkar, head of the energy sector team at DBS Bank, said optimism over a near-term agreement appeared to be fading, adding that upside risks for oil prices would return if no deal was reached before the end of the month.
Market estimates remain highly sensitive to political developments. A diplomatic breakthrough could reduce the risk premium and lead to a fall of between $8 and $12 per barrel, according to analysts cited in market reporting. Conversely, any renewed escalation, or fresh threats to the Strait of Hormuz, could push Brent back above $115 per barrel.
The latest rise in crude prices comes as oil markets are already adjusting to lower available supply. Reuters reported that April OPEC output fell to a 20-year low, while continuing disruption linked to the Middle East conflict has complicated expectations for a return to normal export flows.
For Europe, higher oil prices would create additional pressure on transport, industry and consumer costs. Although European economies are less directly exposed to Middle Eastern crude than some Asian importers, oil remains a global commodity, and price rises are transmitted through fuel, freight, petrochemicals and wider inflation expectations.
The consequences are also being assessed in Ukraine. The National Bank of Ukraine has set out two scenarios for the Middle East conflict. Its baseline scenario assumes that tensions gradually ease from the end of the second quarter and that Brent crude falls to $80 per barrel by the end of 2026. Its alternative scenario assumes a longer war, with oil prices remaining no lower than $100 per barrel until the end of 2026.
That assessment is significant for Ukraine because higher oil prices affect import costs, inflation and the trade balance. The NBU has warned that the Middle East conflict could add to inflationary pressure and weigh on growth if energy prices remain elevated for an extended period.
The geopolitical effects extend beyond consuming economies. Higher oil prices can increase revenues for major producers, including Russia, although sanctions, shipping restrictions and price-cap mechanisms continue to affect Moscow’s ability to benefit fully from global market movements. For Western governments, this adds a further policy concern: a prolonged Middle East conflict could indirectly strengthen the fiscal position of some energy-exporting states while raising costs for import-dependent economies.
For now, traders are likely to remain focused on diplomatic signals from Washington, Tehran and regional capitals. Oil prices are being driven not only by current supply levels, but by the probability of renewed disruption. Statements from political leaders, military developments in the Gulf and any indication of movement in negotiations are therefore likely to produce sharp market reactions.
A durable ceasefire and a credible framework for restoring exports would probably reduce the risk premium. A collapse of talks would have the opposite effect. Until there is clearer evidence that the ceasefire can be stabilised, oil markets are likely to remain volatile, with Brent and WTI exposed to further movements driven by the Middle East conflict.
