Oil prices rose on Tuesday, with analysts saying that uncertainty would keep prices elevated, even as there were no concrete signs of any production losses stemming from the Iran-Israel conflict.
Brent crude futures climbed 82 cents, or 1.1%, to $74.05 a barrel as of 0840 GMT. U.S. West Texas Intermediate crude was up 77 cents, or 1.1%, at $72.54.
Both contracts rose more than 2% earlier in the trading session but also notched declines before bouncing back in volatile trading.
Iran is the third-largest producer among members of the Organization of the Petroleum Exporting Countries and there is widespread concern the fighting could affect exports from there. Additionally, investors are watching for signs shipments through the Straits of Hormuz, through which flows about 19 million barrels per day of oil and oil products, may be impacted.
"The market is largely worried about disruption through Hormuz but the risk of that is very low, said Saxo Bank analyst Ole Hansen.
There is no appetite around closing it since Iran would lose revenue and the U.S. wants lower oil prices and wants to lower inflation, he added.
There have been no signs of supply losses but ships moving in the vicinity of the Strait and the Gulf have been affected by electronic warfare measures that have interfered with navigation systems.
Early on Tuesday, shipping sources said a vessel collided with two other ships sailing near the Strait of Hormuz, highlighting the risks to companies moving oil and fuel supplies in the region.
Despite the potential for disruptions, there are signs oil supplies remain ample amid expectations for lower demand.
In its monthly oil report released on Tuesday, the International Energy Agency revised lower its world oil demand estimate by 20,000 bpd from last month's forecast, while increasing the supply estimate by 200,000 bpd from last month's estimate to 1.8 million bpd.
Investors are also focusing on central banks' interest rate decisions, Tamas Varga, analyst at PVM Associates said in a note, with the U.S. Federal Open Market Committee, which guides the Federal Reserves rate movements, set to meet later on Tuesday.
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The Strait of Hormuz remains a vital maritime chokepoint and serves as the primary artery linking the Persian Gulf to international energy markets. With approximately 20% of global oil and gas shipments transiting this waterway, it is the backbone of energy security for Asia, Europe, and beyond.
China’s exports grew faster than expected in April, as overseas buyers moved quickly to secure supplies amid fears that the conflict involving Iran could drive up global energy and transport costs.
Asian stocks surged to record highs on 7 May as investors priced in growing hopes of a potential Middle East peace deal, while oil prices eased and the U.S. dollar weakened amid shifting global risk sentiment.
Stocks around the world climbed to fresh record highs on Wednesday (6 May), while oil prices fell sharply, after reports suggested the United States and Iran were nearing an agreement to end conflict.
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