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US Oil Update: Oil Prices Climb as Middle East Tensions Raise Supply Concerns

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Oil futures rallied on Tuesday, rising over 2% as escalating military conflicts between the US and Iran in the Strait of Hormuz sparked fears of prolonged energy supply disruptions.

Front-month West Texas Intermediate crude surged 2.9% to $88.22 per barrel, while Brent futures climbed 2.5% to $92.72/bbl.

"Crude oil prices surged on the prospect of supply disruptions continuing for the foreseeable future as the US and Iran escalated attacks on each other," ANZ analysts noted.

US Central Command reported firing on Islamic Revolutionary Guard Corps forces preparing to deploy naval mines. In retaliation, Iran launched missile and drone strikes on US air bases in Jordan, while the UAE intercepted an incoming drone over its territorial waters.

"Officials from both sides are now preparing for the conflict to drag on for months as talks are deadlocked," ANZ added.

Physical transit hazards further rattled energy markets as two oil supertankers were struck by projectiles while attempting to exit the Strait of Hormuz.

According to the UK Maritime Trade Organization and maritime security report, the South Korean-operated Senegal Prosperity was hit by three projectiles while sailing 17 nautical miles east of Khasab, Oman, compounding supply chain vulnerabilities.

Meanwhile, longer-term structural adjustments unfolded as the US finalized an agreement granting authorities a 35% equity stake in North American Blue Energy Partners, along with a 100-year concession for 17 strategic Venezuelan developments holding roughly 65 billion barrels of reserves.

While Rystad analysts cautioned that multi-decade investments depend heavily on future political durability, TPH Energy Research noted that the pact could ultimately boost heavy crude supplies for US refiners and widen discounts on heavy grades.

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