Oil prices hit five-week high on US-Iran tensions, Hormuz blockade fears

Crude climbs on geopolitical jitters

Oil prices jumped to a five-week high on Tuesday, driven by escalating military strikes between the United States and Iran and a fresh blockade threat from Houthi forces in the key Strait of Hormuz. Benchmark Brent crude rose over 2% in early trade, while West Texas Intermediate followed suit.

The rally came as traders weighed the risk of a prolonged disruption in one of the world's most vital oil chokepoints. The Strait of Hormuz handles roughly a fifth of global petroleum consumption.

Goldman Sachs warns of $120 crude

Investment bank Goldman Sachs issued a stark warning: crude prices could surpass $120 per barrel if the Strait of Hormuz disruptions continue. The note spooked already nervous markets that had been pricing in a premium for geopolitical risk.

"If the strait remains blocked for more than a week, we could see a sharp spike in prices," the bank said in a client note. Analysts pointed to the 2019 Abqaiq attacks as a precedent for how quickly supply shocks can escalate.

Houthi blockade threat compounds supply fears

Houthi forces, backed by Iran, have threatened to blockade the strait in response to US strikes on Iranian positions. The group has previously used drones and missiles to target Saudi and Emirati oil infrastructure.

The threat comes as the Red Sea remains tense due to Houthi attacks on commercial shipping. The twin risks have pushed oil traders to reassess supply route security in the Middle East.

IEA steps in, markets remain volatile

The International Energy Agency released a statement from its executive director, calling for calm and monitoring the situation closely. The IEA said it was ready to coordinate emergency stockpile releases if needed.

But the reassurance only briefly steadied markets. Oil reversed some gains later in the session after reports of renewed peace talks between Iran and the US. Traders remain split on whether the conflict will de-escalate or spiral further.

India, which imports over 80% of its crude, faces the highest risk. A sustained price spike could widen the trade deficit and fuel inflation, though government officials have not yet commented on the situation.

What to watch

All eyes are on the Strait of Hormuz in the coming days. If the blockade materialises or attacks intensify, oil could test $100 and beyond. Traders will also watch for any IEA emergency meeting or OPEC+ production response.