Oil prices jumped on Tuesday after Iran attacked a Qatari LNG tanker near the Strait of Hormuz and a second vessel was struck by a projectile, but crude remained close to its lowest levels since late February as an unmistakable wave of returning supply continued to weigh on the market. The tension between a re-rated security risk and a bearish supply backdrop has become the defining feature of oil trading.
Brent crude settled 3% higher at $74.16 a barrel and WTI advanced 2.8% to $70.44, with both benchmarks extending gains after hours when the United States revoked Iran’s oil-sale license — Brent reaching $76.04 and WTI $72.25. Even after the spike, prices sat only modestly above the four-month lows plumbed in late June, before the conflict-era premium had fully drained away.
The supply side gave traders ample reason to stay cautious. Over the weekend, OPEC+ members led by Saudi Arabia approved a quota increase of 188,000 barrels per day for next month, continuing a progressive unwinding of long-standing production curbs as market conditions normalize. Major Persian Gulf producers are rapidly accelerating output, with Saudi exports approaching pre-war levels and the UAE, which left OPEC during the conflict, having fully restored its shipping flows.
In perhaps the clearest signal of softening conditions, Saudi Aramco cut the price of its Arab Light crude for Asian buyers next month by $11 a barrel, widening the differential to a $1.50 discount against the regional benchmark. The last two times the company offered the grade at a discount were during the oil price wars of 2020 and 2015 — a striking indication that the kingdom is prioritizing volume and market share as returning barrels compete for buyers.
Physical flows through Hormuz also kept recovering despite the attacks. Reports indicated that at least eight Japan-linked vessels exited the strait via a route near Iran, including five supertankers each capable of transporting 2 million barrels of crude. The steady normalization of traffic underscores why the market has treated recent security incidents as flare-ups around a bearish trend rather than the start of a sustained disruption.
The risk, of course, is that the pattern breaks. Iraq has reportedly pressed OPEC for a higher production quota and signaled it could follow the UAE out of the cartel if its demands are not met, adding internal strain to the group. And Tuesday’s attacks show that the Hormuz standoff retains the capacity to whipsaw prices at any moment. For now, though, the weight of supply is keeping a firm lid on crude.
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