Oil gains as Gulf truce faces strain

Oil prices rose on Monday as renewed US-Iran military exchanges unsettled traders and slowed energy traffic through the Strait of Hormuz, reviving concerns that a fragile pause in hostilities may not hold long enough to restore normal crude flows.

Brent crude futures climbed 58 cents, or 0.8 per cent, to $72.57 a barrel at 0207 GMT, while US West Texas Intermediate crude rose 88 cents, or 1.3 per cent, to $70.11. The gains followed several sessions of volatile trading, with investors weighing fresh supply risks against signs that some Gulf shipments were beginning to move again after weeks of severe disruption.

The immediate trigger was a new round of tit-for-tat strikes that exposed the weakness of the interim peace arrangement between Washington and Tehran. The agreement had eased market anxiety earlier by raising hopes that the Strait of Hormuz, one of the world’s most important energy corridors, would return steadily to regular operations. Instead, the latest attacks again forced shipowners, insurers and refiners to reassess the risks of moving cargoes through the waterway.

“There’s still plenty of risk facing the oil market. Even so, participants appear to be… focusing on what a continued recovery in oil flows would mean for the global balance,” ING analysts said in a note on Monday.

The strait carries close to a fifth of global oil consumption and is central to exports from major Gulf producers. Any sustained interruption can ripple quickly through crude, refined products, insurance rates and freight markets. Traffic had improved after the interim understanding, with more tankers exiting the Gulf under tighter security arrangements, but the latest strikes slowed the recovery and raised doubts over whether backlogs can be cleared quickly.

Market reaction remained measured compared with the sharp surges seen earlier in the conflict. That reflected expectations that neither side wants a full closure of the waterway, as well as the belief that diplomatic channels remain open. Traders also noted that demand has weakened after months of elevated prices, giving consumers and refiners less room to absorb another sustained spike.

The restraint in prices also points to a shift in market psychology. Earlier fears centred on outright loss of supply. The current concern is more complex: whether the recovery in flows will be uneven, expensive and vulnerable to further military incidents. Tanker availability, war-risk premiums, port delays and route restrictions are now central to pricing decisions, alongside headline production figures.

Global oil balances remain tight despite weaker demand. Supply losses from the Gulf conflict have cut into inventories, while emergency stock releases and higher Atlantic Basin exports have helped soften the blow. A full return to normal flows is unlikely to be immediate because shipping lanes, insurance arrangements and port schedules need to be stabilised before refiners can rely on consistent delivery.

The latest price move also comes as producers and consuming countries face a delicate policy test. Gulf exporters are under pressure to restore volumes without appearing to compromise on security. Import-dependent economies want lower prices but cannot ignore the risk of another supply shock. The US is seeking to prevent the strait from becoming a bargaining chip, while Iran has signalled that control of nearby waters remains central to its regional posture.

For refiners, the uncertainty has complicated purchasing plans. Some Asian buyers have reduced spot exposure or diversified cargoes where possible, while others remain tied to long-term Gulf supply contracts. Higher freight and insurance costs can narrow refining margins even when benchmark crude prices appear contained. That leaves fuel markets exposed to sudden swings if another vessel incident delays shipments.

Financial markets showed a similar mix of caution and relief. Oil-sensitive currencies and equities did not register panic moves, suggesting investors still expect diplomacy to limit the conflict. Yet options markets and physical cargo pricing continued to reflect a premium for Gulf risk. The gap between a temporary disruption and a durable supply crisis remains narrow, especially if another attack hits a vessel or port facility.