Crude futures settled higher in after-hours trading on Wednesday as the US and Iran stepped up attacks on energy and vessels in the Strait of Hormuz, stoking concerns that the conflict will further disrupt crude flows and tighten an already fragile global market.
Brent futures rallied 3.5% to $101.36 per barrel, while Dubai 1st Line (Platts) energy futures surged 3.9% to $97.50/bbl.
The US Central Command said on Tuesday that its forces destroyed five Iranian crude oil tankers in retaliation for attempted attacks on an American warship.
In a statement, Centcom said that the US warship successfully evaded the attempted Iranian attacks and continued to patrol regional waters.
Iranian media said Tehran, in response, targeted two US warships and eight oil tankers in the Persian Gulf, marking the biggest wave of tit-for-tat attacks on vessels in the strategic waterway by both sides since the onset of the Middle East conflict in February.
The UK Maritime Trade Operations said on Wednesday that a tanker was struck by a drone in Iraqi territorial waters. The UKMTO also reported that several merchant vessels in the Gulf had been hit by disabling fire overnight.
The British maritime security agency said a vessel at anchorage off Dubai was listing, possibly taking on water after being struck by a projectile.
The recent developments reinforce the view that "we are still some way from a restart in talks," ING strategists said, adding that, in the meantime, the market is likely to continue to price in a sizeable risk premium.
Meanwhile, the escalation comes as Yemen's Iran-backed Houthis target energy facilities in Saudi Arabia.
On Tuesday, Saudi Arabia's Foreign Affairs Ministry said Yemen's Houthis targeted civilian and economic assets in the cities of Abha, Khamis Mushait, Jazan and Najran. Over 70 civilians were injured in the attacks, the ministry said.
The ministry said the attacks caused fires at several energy facilities and led to temporary shutdowns.
Despite the escalation, ING analysts said estimates of oil flows through Hormuz are edging higher, with suggestions that flows are about 10 million barrels per day, about 50% of pre-war levels.
On the supply side, the Energy Information Administration said in its September 2026 Short-Term Energy Outlook released Wednesday that Middle East oil production is projected to rise in the coming months as flows through the Hormuz gradually recover and producers use alternative export routes.
Despite the projected uptick, the agency said persistent regional export bottlenecks will keep production capped below pre-conflict levels until Q2 2027.
Global crude prices have remained elevated as disruptions to Middle East supplies have contributed to a sharp inventory drawdown. The EIA said that crude prices averaged about $91/bbl in August, up $7 from July.
The agency said global crude inventories have dropped by an estimated 400 million barrels so far this year.