Oil hits 5-week high as fresh US-Iran tensions reignites Strait of Hormuz supply fears

Oil prices climbed to their highest closing levels in five weeks as renewed US-Iran fighting revived fears of disruptions to crude shipments through the strategically vital Strait of Hormuz.

West Texas Intermediate (WTI) rose 0.9% to settle at $91.01 a barrel, extending its winning streak to three sessions. Brent crude gained 1% to close at $95.63 a barrel, crossing $95 for the first time since late July.

The latest escalation came after the US carried out another round of strikes on Iran. President Donald Trump warned Tehran against retaliation, but Iran responded by attacking Jordan, Bahrain and Kuwait—countries that host US forces.

The conflict has once again put shipping through the Strait of Hormuz under the spotlight. The US reportedly struck two Iranian vessels on Tuesday under a new “tanker-for-tanker” policy approved by Trump. A day earlier, two oil supertankers trying to leave the waterway were reportedly hit by projectiles.

Hormuz risk drives oil premium 

The renewed fighting has shifted market expectations towards a prolonged military confrontation, reducing hopes for a negotiated settlement.

Crude prices are now around 30% higher than when the war began in late February. Refined fuels, particularly diesel, have risen even more sharply amid the West Asia conflict and the continuing Russia-Ukraine war.

The Strait of Hormuz remains central to the supply outlook. US Treasury Secretary Scott Bessent said 17 million barrels of crude moved through the waterway on August 31. Energy Secretary Chris Wright said exports were averaging around 8 million barrels a day, while another 4 million to 5 million barrels were being transported through pipelines that bypass the strait.

Iran's Islamic Revolutionary Guard Corps, however, said the latest fighting had “only tightened the lock” on Hormuz.

US refiners ramp up 

The supply risks are already being reflected in the US fuel market. Weekly data from the Energy Information Administration showed US refinery runs rising to their highest level in seven years, as refiners seek to take advantage of strong margins. Midwest refinery utilisation reached an unprecedented 103.5% of capacity.

At the same time, US gasoline imports fell to about 370,000 barrels a day last week, highlighting the tightening nature of the fuel market.

Chevron CEO Mike Wirth said global oil supply and demand were moving back towards balance following increased flows through the Strait of Hormuz in recent weeks, although he acknowledged that significant risks remain.