Oil futures extended rally on Tuesday to hit its highest in more than a month fueled by the US reinstatement of a maritime blockade in the Strait of Hormuz and a 20% transit levy.
Brent crude futures rose 2.2% to $85.11 per barrel, while Murban crude futures advanced by 3.5% to $80.84/bbl. Both contracts rose about 10% on Monday and hit their highest since Mid June.
The immediate catalyst is the US military's move to reimpose a blockade on Iranian shipping and enforce a 20% "reimbursement" fee for all other cargo transiting the Strait of Hormuz, analysts said.
The situation on the ground remains precarious, with the Joint Maritime Information Centre initiating blockade enforcement as of 4 p.m. ET on Tuesday.
"The move threatens to trigger further attacks from Iran and puts at risk the recovery of oil supplies that had begun after the US-Iran peace deal last month," ANZ analysts said.
President Trump said that the US will serve as the "guardian" of the waterway, while Central Command continues a sustained campaign of strikes against Iranian military targets to degrade their ability to threaten commercial traffic.
"Renewed attacks in the region have ramped up safety concerns among shipowners and limited the willingness of operators to return to normal routing patterns," ANZ added.
However, Macquarie said in a note that renewed tensions in the Middle East may lift oil prices in the short term, but ample global supply should drive a sharp pullback once geopolitical risks ease.