Oil surges 3% as Iranian attacks on UAE threaten global supply

Oil prices climbed sharply on Tuesday as Iran launched fresh strikes against the United Arab Emirates, reigniting fears that a widening conflict could choke off a critical artery of global energy supply. Brent crude futures rose $3.21 to $103.42 a barrel, a gain of 3.2%, while US West Texas Intermediate crude added $2.71 to settle at $96.21, up 2.9% for the day. The moves reflected a market bracing for sustained disruption rather than quick resolution to the US-Israeli war with Iran, now three weeks old.

The immediate trigger was an Iranian attack on Fujairah, a port on the Gulf of Oman just outside the Strait of Hormuz. The strike ignited a fire at the export terminal and forced a halt to oil loading operations—the third attack in four days on the same facility. Fujairah handles roughly 1% of global oil demand, making it a chokepoint whose closure ripples through world markets. The broader concern is the Strait of Hormuz itself, the narrow passage through which about 20% of the world's oil and liquefied natural gas flows. With that route effectively closed, the UAE—OPEC's third-largest producer—has been forced to cut output by more than half, according to two sources familiar with the matter.

Middle East crude benchmarks have climbed to record highs, becoming the world's most expensive oil as traders price in the scarcity of available barrels. Yet the market has not returned to the panic levels seen earlier in the month, when prices briefly touched nearly $120 a barrel. Some tankers have begun moving through the strait again, a development that briefly eased tension on Monday before prices resumed climbing. The question now is whether this represents a genuine opening or merely a temporary lull. Tony Sycamore, an analyst at IG, captured the underlying anxiety: the situation remains fragile enough that a single Iranian militia group firing a missile or laying a mine could reignite the entire crisis.

The geopolitical dimension complicates any near-term resolution. President Trump called on US allies to send warships to escort shipping through the strait, but Germany, France, and others declined. Germany's defence minister stated plainly that this is not their war. France's President Macron went further, saying his country would never participate in operations to unblock the strait and would only join efforts to restore freedom of navigation once hostilities had ended. The White House economic adviser Kevin Hassett told CNBC that tankers are beginning to move through again and that the administration expects the conflict to last weeks rather than months. But traders are not betting on quick resolution; they are positioning for prolonged disruption.

The International Energy Agency has suggested that member countries release additional oil from strategic reserves beyond the 400 million barrels already committed. Technical analysis suggests WTI could reach $124 a barrel by the end of March if tensions persist. The market is caught between two competing signals: some evidence that shipping can resume, and the hard reality that a single new attack could reverse those gains. For now, the price floor has risen, and the risk premium embedded in every barrel reflects a conflict with no clear endpoint in sight.