Oil Up as US Strike on Iran’s Qeshm Sparks Supply Fears

Key Moments

Geopolitical Tensions Lift Crude Prices

Oil futures climbed more than $1 on Tuesday as fresh military developments and stalled diplomatic efforts reignited concerns over supply risks.

By 0744 GMT, U.S. West Texas Intermediate (WTI) crude was higher by $1.6, or 1.66%, at $98.06 per barrel, while Brent crude futures advanced $1.84, or 1.76%, to $106.61 per barrel.

The gains came after both benchmarks fell more than 7% on Monday, when talks between Iranian and Qatari officials had briefly raised hopes for an agreement to end the US-Israeli war with Iran, before those expectations faded.

U.S. Strike on Qeshm Island and Stalled Negotiations

A U.S. official said on Monday that the United States had struck Iran’s Qeshm Island, an operation some officials characterized as defensive, intended to deter Iran from targeting commercial shipping in the Strait of Hormuz.

On Tuesday, a senior Iranian official told Reuters that Washington and Tehran remained far from reaching a deal to stop the war and that Tehran would not agree to what were described as Washington’s “excessive demands”.

Iran’s parliament speaker Qalibaf said Tehran had given Washington a “strong and rational response,” adding, “The ball is in the US’ court,” according to state media.

Market Interpretation and Risk Premium

Analysts noted that the latest developments have reintroduced a geopolitical risk premium into crude prices.

“The report added a degree of risk premium back into the oil price,” said Tim Waterer, chief market analyst at KCM Trade.

“Just when markets were starting to price in a more diplomatic path, this reminder of ongoing military activity has flipped the tone.”

Domestic Political Backdrop and Price Dynamics

The war, which started in late February, has been a major factor behind elevated gasoline prices that have weighed on voters. Trump is facing pressure to end the conflict, with mid-term elections scheduled for Tuesday.

“For now, the risk of supply disruptions continues to provide a floor for prices, while uncertainty over Washington’s next move, political developments and traders’ reluctance to carry aggressive positions are capping the upside,” said Priyanka Sachdeva, head of market insight at Phillip Nova.

Brent crude finished October at its highest level in six months, amid concerns that the conflict could intensify again after the U.S. midterm elections.

Additional Pressure Points in Russia-Ukraine Theater

Further tension in the broader energy complex emerged from the Russia-Ukraine front. A Ukrainian drone strike damaged an oil refinery in the Russian city of Yaroslavl, governor Mikhail Evrayev said on Tuesday.

Separately, Russia carried out a large overnight attack on Ukrainian energy infrastructure in the Vinnytsia, Dnipropetrovsk and Kharkiv regions, Interfax news agency reported, citing the defense ministry.

Planned Talks in Abu Dhabi

Diplomatic efforts continue alongside the military activity. The United States will convene delegations from Ukraine and Russia in Abu Dhabi on November 10 and 11 to discuss ending the war, post-war security arrangements and steps toward de-escalation.

Key Price and Event Summary