Oil holds gains as traders weigh U.S.-Iran conflict, Houthi Saudi blockade

Oil prices were little changed in Asian trading on Tuesday after settling more than 1% higher in the previous session, as investors assessed escalating U.S.-Iran hostilities and the risk to Middle East energy supplies from Yemen’s Houthi movement’s naval blockade against Saudi Arabia.

As of 20:35 ET (00:35 GMT), Brent Oil Futures expiring in September edged down 0.3% to $88.96 per barrel, while West Texas Intermediate (WTI) crude futures traded flat at $82.53 per barrel.

Both contracts settled nearly 1% higher on Monday after sharp swings in the session amid heightened uncertainty.

Traders were reluctant to take large positions amid rapidly evolving geopolitical developments. The market has remained volatile, swinging between hopes of renewed diplomacy and fears of supply disruptions.

Reports of a possible ceasefire proposal between Washington and Tehran briefly weighed on prices during Monday’s session before crude rebounded after the Iran-backed Houthis announced a maritime embargo targeting Saudi Arabia.

The blockade threatens shipping through the Bab al-Mandeb strait, a critical chokepoint linking the Red Sea to the Gulf of Aden that handles roughly 12% of global trade and significant volumes of oil shipments.

Any sustained disruption could force tankers to take longer routes around southern Africa, raising freight costs and delaying deliveries.

The latest development comes as fighting between the U.S. and Iran intensified, with U.S. forces continuing strikes on Iranian military targets while Tehran has carried out attacks against U.S. allies in the region.
Although Iranian officials have indicated diplomatic contacts remain active, traders remain focused on the risk that the conflict could spread further across key oil-producing regions.

Analysts said geopolitical risk continues to underpin crude prices, though gains have been capped by expectations that previous episodes of Middle East tensions eventually eased without prolonged disruptions to global oil flows.

Attention is also turning to weekly U.S. oil inventory figures from the American Petroleum Institute later on Tuesday, followed by official government data from the Energy Information Administration on Wednesday, for fresh signals on fuel demand in the world’s largest oil consumer.