September WTI crude oil (CLU26) settled up 0.44 (+0.52%) at $85.43 per barrel on Tuesday, while September RBOB gasoline (RBU26) rose 0.0316 (+0.97%) to $3.28 per gallon, extending Monday’s sharp rally and reaching three-week highs. The gains come as the US and Iran remain locked in a standoff over the Strait of Hormuz, with fresh incidents limiting crude supplies from the Middle East.
Prices climbed after a vessel heading out of the strait was struck by an unknown projectile, and Iran’s Fars news agency reported that a tanker belonging to a UAE company was detained, with Iran demanding ships pay to transit the waterway. On Monday, President Trump said he is not interested in extending the expiring agreement with Iran, dimming prospects for a swift reopening of the strait. US Energy Secretary Chris Wright added that the US is playing the long game with Iran, signaling no immediate de-escalation.
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Supply Disruptions and Geopolitical Tensions
The market is also supported by fresh Israeli attacks on Iran-backed Hezbollah in Lebanon and continued strikes on Hamas in Gaza. Yemen-based Houthi rebels have attacked ships in the Red Sea, and multiple vessels have been hit by projectiles in the Strait of Hormuz. These developments dampen hopes for a quick end to hostilities and a return to normal oil flows.
Despite the tensions, some Gulf countries have managed to keep crude moving. Last week, Energy Secretary Wright noted that 9 million barrels per day crossed through the strait over the past seven days, higher than earlier expectations of 4 million. Vessel-tracking data from Bloomberg, Kpler, and Vortexa shows that the UAE, Qatar, Iraq, and Kuwait have been shipping oil by turning off transponders on their tankers, using so-called dark transits to avoid detection.
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Treasury Secretary Bessent said last Friday that the administration will soon announce unusual economic measures against Iran, which would add to the current US naval blockade of Iranian ports. However, there have been no signs of progress toward a US-Iran agreement to fully open the strait. An Iranian military spokesperson said last Thursday that no ship can safely pass without Iran’s authorization, calling President Trump’s claims of control “nothing more than lies.”
Market Implications and What to Watch
The International Energy Agency (IEA) warned in its monthly report that the global oil supply deficit will worsen, even as demand takes a hit from the war and high prices. The IEA said global inventories will fall in Q3 at twice the previously estimated rate due to ongoing disruptions from the US-Iran conflict.
Ukraine’s intensified drone attacks on Russian oil infrastructure are also tightening supply. Ukraine has hit Russian refineries, tankers, and pipelines at least 30 times in July, the second-highest monthly number since the war began in 2022. Russian crude-processing rates averaged 3.51 million bpd in July, the lowest in 24 years, and crude production fell to 8.89 million bpd, the lowest in six years, according to OPEC data.
On the bearish side, OPEC delegates approved their final increase of +188,000 bpd in crude production for September, restoring all of the 1.65 million bpd cutback from 2023. The group plans to hold output steady for the rest of the year, but these increases may prove difficult to achieve amid renewed US-Iran military attacks. OPEC’s July crude production rose by +1.16 million bpd to 19.44 million bpd.
Investors are now looking ahead to Wednesday’s EIA weekly inventories report, which is expected to show a +200,000 bbl rise in crude stocks and a -1.5 million bbl decline in gasoline supplies. Last week’s report showed crude inventories rose by 17.4 million bbl, the largest increase in more than three years, driven by a sharp drop in US crude exports. Gasoline inventories fell by -968,000 barrels, slightly less than expected.
US crude oil production in the week ending Aug 7 rose to 13.805 million bpd, just below the record high of 13.862 million bpd set in November 2025. Baker Hughes reported that the number of active US oil rigs rose by +1 to a 1.25-year high of 455 rigs in the week ended August 14.
The situation in the Strait of Hormuz remains fluid, and any further escalation could push prices higher. However, the ability of Gulf producers to maintain dark transits and the expected OPEC+ output increases could cap gains. The market will be closely watching for any diplomatic breakthrough or new military incidents in the coming days.
