U.S. crude oil prices surged past $110 per barrel on Tuesday, while the global benchmark Brent crude reached its highest level since May. The sharp rise followed escalating violence in the Strait of Hormuz and the expiration of near-term U.S. futures contracts.
Front-month U.S. West Texas Intermediate crude oil futures jumped 6.58% by 7:38 a.m. ET, trading at approximately $110.48 per barrel. These contracts were set to expire on Tuesday. The price movement marked the ninth consecutive session of gains for November delivery WTI contracts, putting the monthly increase at nearly 20%.
Brent crude futures for December delivery were last seen trading 1.94% higher at $111.67 per barrel, marking their peak price since May.
The market reaction centers on growing instability in the Middle East, specifically attacks on commercial shipping in the Strait of Hormuz. Ship tracker Kpler reported that at least 18 vessels have come under fire in the region over the past two weeks. Iranian state-affiliated news agency Tasnim reported that Iran's Revolutionary Guard Corps said two "non-compliant" oil tankers were set ablaze in the strait after hitting mines laid by its naval unit.
Tensions between Iran and the United States also remain a focal point for investors. Esmaeil Baqaei, spokesperson for the Iranian Foreign Ministry, stated at a weekly news conference that Tehran would respond to any American strike "in equal measure, if not more forcefully." This comment came after U.S. President Donald Trump said earlier in the month that American forces would not attack Iran before the midterm elections on Nov. 3.
Tamas Varga, an analyst at PVM Oil Associates, told CNBC that the strength in front-end WTI prices ahead of contract expiry signals tightness in the global crude oil market. Varga noted that falling export volumes from the Middle East, driven by tanker attacks and Houthi strikes on Saudi oil infrastructure, are contributing to the price increases.
Varga also pointed to a U.S. decision to exempt the Russian shadow fleet from sanctions as a factor influencing supply dynamics. He explained that this move could lower freight rates, which had previously been a prohibitive cost for increasing demand for U.S.-sourced crude. With this barrier removed temporarily, U.S. crude grades are again viable replacements for Middle Eastern oil. Additionally, Varga noted that U.S. commercial oil stocks are expected to have declined in the previous week.