Oil prices rally near $110 as Hormuz risks persist in 2026

What is driving the latest oil rally

Oil prices rose again on Tuesday, extending gains from the previous session as traders stayed focused on the Middle East conflict and stalled US-Iran peace efforts. Market sentiment remained cautious, with shipping conditions around the Strait of Hormuz described as constrained. The conflict has now reached about two months, keeping supply risks elevated.

Where crude prices were trading on Tuesday

US West Texas Intermediate (WTI) crude was trading at $17.31 a barrel, up $1.94 or 0.98% in the latest update. Brent crude was at $109.30 a barrel, higher by $1.05 or 0.97%. These moves followed a strong start to the week, with prices already pushed higher by concerns over transit restrictions and diplomatic uncertainty.

Monday’s surge set the tone

The rally gained momentum on Monday, when crude prices surged around 3% to hit a two-week high. Brent futures settled at $108.23 a barrel, up $1.90 or 2.8%. US WTI closed at $16.37, rising $1.97 or 2.1%. Separately reported late-trading levels on Monday also showed Brent at $107.49 (up 2.05%) and WTI at $16.17 (up 1.88%) by 2346 GMT, underscoring intraday volatility.

Diplomacy stalled, and markets noticed

Expectations of progress weakened over the weekend after US President Donald Trump called off a planned Islamabad visit by envoys Steve Witkoff and Jared Kushner. This came as Iran’s foreign minister Abbas Araqchi had reached Pakistan, contributing to uncertainty about talks. Diplomatic signals continued to guide trading as investors weighed how long supply disruptions could persist.

Strait of Hormuz restrictions remain the key flashpoint

The Strait of Hormuz is a critical oil transit route and typically handles cargo equivalent to about 20% of global oil and gas consumption, according to the provided text. After the breakdown in diplomatic momentum, Iran maintained restrictions on shipping through the waterway, while the United States continued its blockade of Iranian ports. Iran has insisted that vessels must obtain its approval before transiting the Strait, while Trump has said the United States has “total control” over the route.

Shipping data points to strained flows

Shipping activity through the Strait remained subdued. Data from Kpler showed only one oil products tanker entering the Gulf on Sunday (26 April, as cited in the report). That datapoint added to concerns that physical supply chains are tightening, rather than simply experiencing short-lived delays.

Official and analyst signals added to volatility

The International Energy Agency (IEA) warned the naval standoff is the “biggest supply shock in history,” with the blockade disrupting about a fifth of the world’s oil flows, according to the ICIS report excerpt. Axios also reported that Tehran offered a new proposal to Washington aimed at reopening the chokepoint, seeking to end the war and lift the naval blockade while postponing nuclear negotiations, citing a US official and unnamed sources.

Iran’s foreign minister Abbas Araghchi posted skepticism on X on 26 April, saying Iran had “yet to see if the US is truly serious about diplomacy,” as carried in the same excerpt. MUFG Research analyst Michael Wan was quoted saying that continued uncertainty could keep markets “on the backfoot for now.”

A broader risk backdrop: Israel-Lebanon and central banks

Beyond US-Iran negotiations, investors also tracked regional risks involving Israel and Lebanon, as mentioned in the article text. At the same time, global markets were awaiting policy signals from major central banks including the US Federal Reserve, the European Central Bank, and the Bank of Japan. The combination of geopolitics and macro uncertainty supported a risk premium in crude.

India-specific risks: inflation and trade balance pressures

For crude-importing countries such as India, higher oil prices can worsen trade deficits and add to inflation, especially through fuels and transportation costs, according to the text. The disruption of shipping lanes can also push governments and companies toward greater use of strategic reserves and revisions to fuel pricing strategies.

A separate report cited in the input said Indian oil marketing companies (OMCs) have begun relying on commercial crude inventories as supply chains tightened following the closure of the Strait of Hormuz, alongside higher freight charges, insurance premiums, and longer transit durations. The article also noted that traders are watching crude exporters and stock levels, and that shifts by OPEC+ or changes in US shale production could influence the market’s direction.

What the latest move looks like in numbers

Market impact and why it matters

The price action reflects a market that is repricing near-term supply risks tied to one of the world’s most important energy corridors. With the Strait of Hormuz described as heavily constrained, even small changes in shipping flows can shift expectations for refined products availability and freight costs.

The article also linked higher crude to inflation risks, which can influence interest-rate expectations globally. That is why central bank meetings were highlighted alongside geopolitics: energy-driven inflation can alter the policy outlook even when the trigger is outside domestic demand.

Conclusion

Oil extended its rally into Tuesday as stalled US-Iran diplomacy and continuing disruption around the Strait of Hormuz kept supply risks in focus. Traders are watching shipping indicators such as Kpler’s tanker counts, diplomatic signals including any follow-up to Axios-reported proposals, and policy decisions from the Fed, ECB and BOJ that could shape broader risk sentiment.