Brent oil futures were closing out their largest monthly gain in history with another lurch higher on Tuesday after a fresh tanker attack in the Middle East and a warning from the US Defense Secretary that the US would step up attacks if Iran does not make a deal.
Brent crude futures for May were up $5.31, or 4.71%, at $118 per barrel at 1.30pm GMT. Front-month Brent futures were on track for an all-time monthly gain of 63%, according to LSEG data stretching to June 1988. US benchmark West Texas Intermediate has gained 54%, the biggest jump since May 2020.
June Brent by contrast was little changed, gaining just 7 cents to $107 per barrel.
US WTI futures for May CLc1 were up 49 cents, or 0.48%, at $103.
The international benchmark has steadily risen over the last four weeks as the Iran war has escalated, with attacks across energy infrastructure throughout the Gulf that has resulted in the worst-ever oil-and-gas supply disruption in history.
The market has vacillated throughout the month, with a series of dips each time US President Donald Trump suggests the military operation may de-escalate - only to resume its upward path due to the supply impairment caused by Iran's threats against vessels transiting the key Strait of Hormuz, the artery used to ship one-fifth of the world's oil and gas.
Trump has suggested other countries should intervene to open the strait, a move European nations have not wanted to take until hostilities cease. The US has removed sanctions on barrels from Russia and pledged reserve releases with a group of other nations, but those measures will only offset the supply loss for a limited period of time.
"With the oil market's remaining buffers gradually being consumed, the market's vulnerability to a prolonged closure of (Hormuz) means that we are moving closer to physical oil shortages across a wider geographic scope, and the upward momentum for oil prices is likely to strengthen further," said Lin Ye, a vice president for commodities markets and oil at Rystad Energy.
The May contract expires on Tuesday, with liquidity dropping as investors move their exposure ahead of expiry. Volume for May futures was 15,488 lots, some 18 times lower than for the more-active June contract.
VOLATILE TRADE AS FRONT-MONTH EXPIRES
Tuesday's session was volatile, with front-month Brent futures swinging in a range of up 4.8% to down 1.3% from Monday's close.
Meanwhile, US Defense Secretary Pete Hegseth warned that if Iran did not make a deal to end the war, the US would continue with more intensity, telling a briefing on Tuesday that the next few days of the conflict could be decisive.
Hegseth also said that other countries need to step up to help reopen the Strait of Hormuz, echoing a social media post from Trump.
Trump, in a post on Truth Social, urged countries that did not help the US in its coordinated strikes against Iran and are now unable to get jet fuel to buy American oil and go to the Strait of Hormuz and "just TAKE it."
The post came after Trump told aides he is willing to end the military campaign against Iran even if the Strait of Hormuz remains largely closed, leaving its reopening for a later date, The Wall Street Journal reported on Monday. The president's approval ratings have declined as energy prices have increased, with the average price of a gallon of gasoline nationwide surpassing $4 on Tuesday for the first time since August 2022, according to AAA data.
The US president had also warned that the U.S. would "obliterate" Iran's energy plants and oil wells unless Tehran reopened the waterway.
"While diplomatic signals remain mixed, the ground reality suggests that uncertainty will persist," said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm.
"Even in the event of de-escalation, restoring damaged infrastructure will take time, keeping supply tight."
Kuwait Petroleum Corp on Tuesday said its fully loaded crude oil tanker Al Salmi, capable of carrying up to 2 million barrels, was struck by an Iranian attack at a Dubai port. Officials also warned of the risk of oil spills in the area.
