Oil prices surge 5% as US-Iran conflict reignites, WTI tops $90

A renewed flare-up in armed conflict between the United States and Iran sent global oil prices surging nearly 5% in a single session, pushing West Texas Intermediate above $90 a barrel and driving Brent crude close to $95. Tensions around the Strait of Hormuz — the world's most critical chokepoint for oil shipments — have deepened market fears of a supply disruption.

Brent crude for November delivery settled up 4.60% at $94.65 a barrel on the London ICE Futures Exchange on Tuesday (local time), while West Texas Intermediate for October delivery soared 5.20% to close at $90.22 a barrel on the New York Mercantile Exchange.

It was the first time WTI had closed above $90 since July 23, and Brent reached its highest level since July 24. Over the past two trading sessions, WTI has gained 8.18% and Brent 5.98%.

Prices had been up around 2% early in the session before accelerating sharply after news broke that the US had struck Iran for the second time in two days.

US Central Command said it launched strikes against targets linked to Iran's Islamic Revolutionary Guard Corps around noon Eastern time Tuesday. Washington said the action was a response to IRGC attempts to attack civilian vessels transiting the Strait of Hormuz and US military personnel stationed in the Middle East.

Iran immediately vowed retaliation. The IRGC condemned the US strikes on Iran's southern coast as "an act of desperation" and said it had launched strong retaliatory measures. With the two countries exchanging direct strikes, market hopes that last weekend's clash would prove a one-off event quickly faded.

Markets are particularly focused on the risk of disruptions to oil flows through the Strait of Hormuz, the main artery through which crude from Middle Eastern producers reaches global markets. Sustained military clashes and attacks on shipping in the strait could directly shock international oil supply.

Ole Hansen, an analyst at Saxo Bank, said the resumption of armed conflict had heightened concerns that "long-term disruptions to energy supply flows through the Strait of Hormuz" could materialize.

The oil price shock rippled through financial markets. Rising crude prices stoked fears of rekindled inflation, pushing US government bond yields higher and sending major New York stock indexes lower across the board. The 10-year Treasury yield climbed to 4.79%, while the S&P 500 fell 0.7%, the Dow Jones Industrial Average dropped 0.8% and the NASDAQ fell 1.0%.