Crude oil prices eased on Tuesday after a sharp rally a day earlier, but analysts warned that markets remain on edge, with any fresh escalation in the Strait of Hormuz capable of pushing prices back towards — or even beyond — the critical $120 a barrel threshold.
Brent crude, the international benchmark, was trading about 2.1 per cent lower at $112.04 a barrel by late afternoon UAE time, after slipping nearly 3 per cent earlier in the session to around $111.4. US West Texas Intermediate (WTI) fell more sharply, down 3.2 per cent to $102.44 a barrel.
The pullback followed a near 6 per cent surge on Monday, when Brent settled around $114.44 amid heightened fears of supply disruption.
Despite the correction, prices remain elevated at multi-month highs, reflecting persistent geopolitical risk in the Gulf. The latest volatility was triggered by renewed military exchanges between US and Iranian forces near the Strait of Hormuz, alongside fresh concerns over energy infrastructure security in the UAE.
The US said its forces repelled Iranian attacks while escorting commercial vessels through the waterway, including two US-flagged ships. The confrontation has cast doubt on the durability of a fragile ceasefire and underscored the precarious security situation in one of the world’s most critical oil transit routes.
The UAE, meanwhile, confirmed intercepting missiles and reported a fire at the Fujairah oil terminal — a key global storage and bunkering hub — further amplifying fears over supply chain disruption.
The Strait of Hormuz carries roughly one-fifth of global oil flows, making it a vital artery for energy markets. Any sustained disruption threatens to tighten global supply significantly at a time when inventories are already under pressure.
Analysts say the market is now firmly pricing in a geopolitical risk premium. “The market is factoring in the likelihood of further infrastructure damage and prolonged disruption in Hormuz,” said June Goh, senior oil market analyst at Sparta Commodities. “That keeps prices highly sensitive to even minor developments on the ground.”
The broader macroeconomic implications are also drawing attention. Kristalina Georgieva of the International Monetary Fund has warned that oil could climb towards $125 a barrel if the conflict drags on, raising the risk of higher inflation and slower global growth.
Echoing this concern, Indermit Gill of the World Bank said the shock is already hitting economies in “cumulative waves”, starting with energy and cascading into food and broader inflation — a dynamic that could weigh heavily on emerging markets.
The supply shock linked to the Gulf crisis is among the most significant in recent decades. The International Energy Agency has flagged rapid inventory drawdowns despite coordinated reserve releases, pointing to tightening global balances.
Shipping disruptions are compounding the pressure. War-risk insurance premiums for tankers transiting the Gulf have surged sharply, while some vessels remain stranded or reluctant to enter the strait despite US-led efforts to secure passage. Industry groups warn that normal traffic will not resume without credible and sustained security guarantees.
Investment banks are also revising their outlooks. Barclays has lifted its 2026 Brent forecast to $100 a barrel, while cautioning that prolonged disruption could drive prices significantly higher. Other analysts have warned that a full closure or sustained constraint of Hormuz flows could trigger extreme price spikes.
Since the conflict escalated in late February, Brent prices have risen more than 50 per cent, with estimates pointing to a global supply shortfall of up to 14–15 million barrels per day under severe disruption scenarios.
Even if tensions ease, analysts say the market will take time to stabilise. Backlogs of stranded cargo, damaged infrastructure and ongoing security risks could keep supply constrained for weeks or months.
For the UAE and the wider Gulf, the crisis presents a dual reality. Higher oil prices are boosting revenues for producers, but risks to infrastructure and shipping routes underscore the vulnerability of regional energy systems and the urgency of diversifying export corridors.
With geopolitical uncertainty intensifying and supply risks unresolved, oil markets are expected to remain volatile. For now, price direction will be driven less by traditional fundamentals and more by developments in the Gulf — where even limited disruptions continue to send shockwaves across the global economy.
