Oil prices climbed on Tuesday after Iranian forces launched missile strikes against merchant ships transiting the Strait of Hormuz, the first such attack since a US-Iran memorandum of understanding paused hostilities three weeks ago. Brent crude futures for September delivery added as much as $1 to trade at $72.99 a barrel in London, while West Texas Intermediate for August rose to $69.43. The gains reversed a slide that had taken both benchmarks back to pre-war levels, as the assault punctured assumptions that the waterway—through which roughly a fifth of global oil flows—was returning to normal.

Viewed from Washington, the incident represents a direct challenge to the fragile diplomatic framework. US officials told Axios that Iran’s Islamic Revolutionary Guard Corps fired at least two missiles at vessels on Monday night, causing significant damage but no casualties. The United Kingdom Maritime Trade Operations separately reported a tanker struck by an unknown projectile near Limah, Oman, triggering a fire. President Donald Trump responded by reiterating that the United States would either “make a deal” with Tehran or “finish the job,” while Iran’s foreign minister warned that continued threats would prevent the start of final-status negotiations. Analysts in London noted that the flare-up injects a fresh geopolitical risk premium into a market that had largely priced in a durable détente.

Supply-side dynamics are simultaneously exerting downward pressure. The United Arab Emirates pumped more than 3.8 million barrels per day in June, its highest since April 2020, after leaving the OPEC+ quota system in May. The broader producer alliance, including Russia, agreed on Sunday to raise collective output targets by a further 188,000 barrels per day from August, building on identical increases for June and July. Saudi Arabia compounded the bearish signal by slashing the official selling price of its Arab Light crude to Asia by $11 a barrel for August deliveries—the steepest discount in over two decades. Traders in Singapore interpreted the move as a prelude to a battle for market share, with Abu Dhabi also offering cargoes at discounts via tender.

Despite the uptick in hostilities, the physical recovery of Hormuz traffic remains halting. Shipping data showed Japanese-owned supertankers heading into the strait on Tuesday, joining vessels that had been stranded, but daily transits are still in single digits and well below pre-crisis norms. Shipowners remain cautious, limiting the pace at which Gulf exports can return to full capacity. Market attention is now split between the trajectory of US-Iran talks and the speed of demand recovery, particularly from China. The next factual milestone is the resumption of indirect negotiations, which diplomats in Brussels say could collapse if military provocations continue, leaving the supply outlook hostage to a conflict that has already drained the US Strategic Petroleum Reserve to its lowest level since 1983.