Oil prices climbed about two per cent to a one-month high yesterday after the US reimposed a naval blockade on Iran, which will reduce oil flows from the region through the Strait of Hormuz.
Before the Iran war about 20pc of global oil supplies flowed through the strait.
Limiting price gains were concerns that higher energy prices could boost inflation, cut global economic growth and ultimately reduce demand for oil.
Brent futures rose $1.43, or 1.7pc, to settle at $84.73 per barrel, while US West Texas Intermediate (WTI) crude rose $1.20, or 1.5pc, to settle at $79.34. For the second straight session, Brent closed at its highest since June 12 and WTI at its highest since June 15.
That price increase kept Brent in technically overbought territory for a second day in a row for the first time since March.
US President Donald Trump stepped back from a proposal to charge a 20pc fee to guard the Strait of Hormuz as part of the conflict with Iran, saying he would instead seek investment deals with Gulf states.
Trump on Monday reinstated a blockade of Iranian shipping and proposed the fee.
Hours before the fee was to take effect, Trump said the strait was open to all shipping traffic except that of Iran.
After that comment, US crude futures briefly turned negative yesterday morning.
Prices recovered later in the day on reports that one Indian crew member was killed and eight others were wounded when Iranian cruise missiles struck two Emirati oil tankers.
In early July, when it looked like the ceasefire between the US and Iran would hold, futures for Brent and WTI were trading near levels seen before the US and Israel started bombing Iran on February 28.
Data showed that US consumer inflation slowed more than expected in June as energy prices retreated, but financial markets still expect an interest rate hike from the Federal Reserve.
Fed chairman Kevin Warsh yesterday vowed to “do my job” if challenged by Trump, who has said he wants the Fed to cut interest rates and boost economic growth.
Ukraine’s military said it struck two Russian oil refineries in the Bashkortostan and Krasnodar regions overnight.
Ukrainian attacks on Russia’s energy infrastructure have caused Moscow to curtail diesel exports, boosting diesel prices around the world.
In the US, diesel futures are up about 21pc so far in July versus a roughly 14pc gain for US crude.
This has boosted the 3-2-1 and diesel crack spreads, which measure refining profit margins, to record highs, according to LSEG data.
The oil market awaited weekly storage reports from the American Petroleum Institute (API) trade group yesterday and the US Energy Information Administration (EIA) today.
Analysts estimated energy firms pulled 2.7 million barrels of crude from storage during the week ended July 10.
If correct, that would be the 13th time in 14 weeks energy firms pulled crude out of storage.
It compares with a decrease of 3.9m barrels in the same week last year and an average decline of 1.5m barrels over the past five years (2021 to 2025).
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