Oil Rises 1.76% After U.S. Strikes on Iranian Targets Near Hormuz
Key Facts
Oil prices rose in Asian trading on Tuesday, November 3, after the United States launched strikes on Iranian targets in the Strait of Hormuz, according to a U.S. official cited by the Associated Press. By 0744 GMT, Brent crude was up 1.76% at $106.61 a barrel, while West Texas Intermediate rose 1.66% to $98.06, according to Reuters. The gains came after prices fell more than 7% in the previous session, when talks between Iranian and Qatari officials lifted hopes of ending the war. Iranian media reported explosions on Qeshm and Hengam islands and in Bandar Abbas. Confirmation of the strikes refocused the market on the risk of escalation around a vital energy shipping route.
A U.S. official said the strikes targeted Iranians who were using surface-to-air missiles against the United States in the strait. That official account differs from a description of the development as a standalone military move, linking the operation directly to the confrontation over the sea lane. Iranian parliament speaker Mohammad Baqer Qalibaf said Tehran had delivered a "strong and rational" response, adding that "the ball is now in the United States' court," according to state media. A senior Iranian official also told Reuters that the two sides remained far from an agreement to end the war and that Tehran would not accept U.S. demands it described as excessive. The remarks put prospects for negotiations at the center of oil pricing as military activity resumed.
Brent had settled on Monday at $104.77 a barrel, down 7.63%, after losing $8.66. Tuesday's rise marked a swift reversal of the sentiment that had driven the previous session's decline, as optimism sparked by Qatari-Iranian talks faded. Tim Waterer, chief market analyst at KCM Trade, said the report "put some risk premium back into oil prices." He added that this came "at a time when markets had begun pricing in a more diplomatic path, so this reminder that military activity was continuing reversed the market's tone." The price move was therefore tied to a change in traders' assessment of the chances of de-escalation, rather than simply a standalone reading of crude prices.
The energy rally extended to Europe, where the front-month Dutch TTF gas contract jumped 4% to 98.60 euros per megawatt hour on Tuesday. The British NBP gas contract rose 4.5% to 245.60 pence per therm. The moves came after hopes faded that high-level talks between Iranian and Qatari officials would produce a diplomatic way out of the conflict. The simultaneous rise in oil and gas highlights energy markets' sensitivity to developments in Gulf shipping, with the impact extending to European gas contracts. This does not mean the two prices moved by the same amount; the two gas contracts posted higher percentage gains than the two crude benchmarks at the prices cited.
The market's sensitivity reflects the Strait of Hormuz's importance to global energy flows. Average oil flows through the strait reached 20 million barrels per day in 2024, equivalent to about 20% of global petroleum liquids consumption, according to the U.S. Energy Information Administration. The agency says flows through the strait in 2024 and the first quarter of 2025 accounted for more than a quarter of global seaborne oil trade, while about one-fifth of global liquefied natural gas trade also passed through it in 2024. Some 84% of the crude oil and condensate that transited the strait in 2024 went to Asian markets. These figures provide context for the importance of any disruption to the route for energy importers, including buyers in Asia.
Attention is turning to mediation and negotiations after Qatari mediators held two rounds of talks with Iranian officials in the previous week, with more discussions planned for this week, according to the Associated Press. The mediators are seeking a framework under which Iran would stop attacking ships in the strait in exchange for the United States lifting its blockade of Iranian ports. Iran said it had a two-day plan to reopen the passage and resume nuclear talks if Washington met its demands. In market data, the American Petroleum Institute's calendar lists November 3 as the release date for its bulletin for the week ended October 30, while the next weekly report from the Energy Information Administration is due on November 12 at 12:00 noon Eastern time, covering the week ended November 6. The agency's report is delayed because of the Veterans Day holiday.