Oil Prices Rise as Hormuz Attacks Fuel Supply Fears

Oil prices reversed earlier losses on Tuesday as escalating security risks in the Strait of Hormuz and Yemen outweighed improving Middle East crude exports and plans by Group of Seven nations to release emergency reserves.

Brent crude futures for December rose 0.4% to $101.01 a barrel, while November U.S. West Texas Intermediate crude gained 0.4% to $89.81.

Middle East oil exports showed a significant recovery during September. Kpler data indicated the region’s seven-day average crude exports reached 18.3 million barrels per day on September 30, exceeding pre-war levels for 14 days during the month. Regional flows averaged 20.22 million barrels per day in the seven days through October 4, still below the pre-war baseline of 23.29 million.

However, supply concerns remain elevated as attacks on vessels increase around the Strait of Hormuz. Fighting in Yemen has also intensified, with Saudi-backed forces launching an offensive against Iran-backed Houthis. The Houthis responded by targeting Saudi airports, while reports indicated another attack on the kingdom’s strategically important East-West Pipeline.

ING analysts said the incident was a reminder that oil flows remain vulnerable. Saudi Energy Minister Prince Abdulaziz bin Salman said 5.8 million barrels had moved through the East-West Pipeline as of Tuesday morning.

Meanwhile, G7 countries agreed to release 100 million barrels of crude oil and diesel from emergency reserves while avoiding energy export restrictions, helping ease some supply pressure.

President Donald Trump also signed an executive order aimed at lowering U.S. diesel prices. Measures include temporarily allowing highway use of tax-free dyed diesel and deferring the federal diesel tax on that fuel through year-end. U.S. diesel prices recently hit a record $6.5276 per gallon on September 22.

The Energy Information Administration also raised its oil price outlook, forecasting Brent crude will average $105 per barrel in the fourth quarter, $14 above its previous estimate.

The EIA expects Middle East production and exports to gradually improve through alternative shipping routes and other workarounds. However, tight diesel markets, declining global inventories and continued attacks on energy infrastructure could keep crude prices volatile. Brent is forecast to fall to an average of $84 per barrel next year.