The flames of war between the U.S. and Iran are reigniting, with the dual straits in the Middle East experiencing supply shocks, leading to the strongest weekly increase in crude oil prices since July.

As U.S.-Iranian hostilities escalate again, concerns about the energy transportation through the Strait of Hormuz and another crucial energy transport channelthe Bab el-Mandeb Straitbeing long obstructed have intensified in the market. The international oil price benchmarkBrent crude oil futuresis expected to record the largest weekly gain since July. After a brief lull, the U.S.-Iran conflict has re-escalated, particularly following U.S. airstrikes on Iranian targets this week, which prompted Tehran to retaliate by attacking U.S. bases in the region, commercial ships passing through the Strait of Hormuz, and launching missiles toward Jordan, Kuwait, and Bahrain. Israel has warned that if it is attacked again by Iran, its current operational constraints will no longer be effective. Although the U.S. has downplayed the characterization of a "full-scale war," the military actions, stagnant negotiations, and Iran expanding its blacklist of vessels imply that the market is re-pricing not just a one-time supply loss but a long-term high-risk state of "limited navigation, with the potential for attacks at any time" in the strait. The overlapping risks posed by these two maritime chokepoints are becoming evident. On September 1, Kpler monitored only four bulk carriers passing through the Strait of Hormuz, far below the ten-day average of about 13; similarly, only 18 vessels transited the Bab el-Mandeb Strait that day, below the ten-day average of about 24. In the longer term, prior to the conflict, the daily total navigation volume through the Strait of Hormuz was approximately 130-140 vessels, and it even dropped to less than 10% of normal levels during the peak of the crisis; the overall shipping volume through the Red Sea and the Bab el-Mandeb Strait had also decreased by over 50% due to attacks by Houthi forces. The most dangerous aspect is that restrictions in the Strait of Hormuz threaten Persian Gulf energy exports, while the Bab el-Mandeb Strait poses a risk to the alternative route for Saudi Arabia's western ports via the Red Sea and the Suez Canal. A simultaneous obstruction of both straits would significantly weaken the routing resilience of the global energy supply chain, leading to an increase in shipping costs and the prices of crude oil, refined products, and natural gas. The return of military action in the Strait of Hormuz has reignited risk premiums. In early Asian trading on Friday, Brent crude rose slightly to nearly $96 per barrel, with a weekly gain exceeding 7%; the North American oil price benchmarkWest Texas Intermediate (WTI) crudewas trading around $92 per barrel. This round of U.S.-Iran conflict escalation occurred after a relatively calm period: the U.S. conducted bombing operations earlier this week, followed by Iranian retaliation against U.S. bases in the region. The Iranian military continued to attack vessels passing through the Strait of Hormuz and launched missiles toward Jordan, Kuwait, and Bahrain. Israel stated that it is prepared to resume combat if necessary and asserted that an Iranian attack would release it from its current constraints, increasing the likelihood of a new round of military escalation. As shown in the chart above, international crude oil prices are anticipated to achieve the largest weekly gain since July, driven by the renewed U.S.-Iran hostilities pushing Brent crude higher. Despite the renewed fighting this week, U.S. Vice President JD Vance downplayed the scale of the conflict, stating that since large-scale military operations had ended weeks ago, he would not characterize it as a war. Republican Congressman Pat Harrigan from North Carolina and a member of the House Armed Services Committee made a different assessment, stating, "From a military perspective, we are clearly caught in a quagmire of conflict and stalled negotiations." Priyanka Sachdeva, head of futures market insights at Phillip Nova Pte Ltd. in Singapore, noted that the oil market is "reassessing its vulnerabilities." She stated, "As fundamental problems with energy transportation and navigational safety remain unresolved, the risk premium can only be compressed for a limited time." The nearly 60% increase is driven by a struggle between energy inflation and shipping resilience. Brent crude has surged nearly 60% this year; due to the Middle East conflict and the Russia-Ukraine war, the increase in prices of refined products like diesel has been even greater. This week, retail prices of this industrial fuel in the U.S. reached the highest level since mid-2022, while European inventories are significantly below seasonal levels. In terms of prices, as of 9:04 AM Singapore time, November delivery Brent crude rose by 0.3% to $95.76 per barrel. October delivery WTI crude increased by 0.4% to $91.65 per barrel. Both Brent and WTI crude prices are poised for the largest weekly gain since mid-July. Brent has cumulatively risen nearly 60% this year, with even higher increases in refined products like diesel, while spot prices for liquefied natural gas in Asia have surged to the highest levels in over three years. For investors, energy stocks, tanker shipping, and refining profits continue to benefit from geopolitical risk premiums, though a substantial portion is categorized as "fear pricing"; should navigation through the straits improve consistently, these related premiums could compress rapidly, while simultaneous deteriorations in the Strait of Hormuz and the Bab el-Mandeb Strait could result in another upward shock to oil prices, global inflation, and long-term bond yields. Despite ongoing hostilities in the Middle East, some crude oil is still being transported out of the Persian Gulf via the Strait of Hormuz; U.S. officials stated this week that the transportation flow in the region remains robust under U.S. military escort. Saudi Arabia has also kept the price of its flagship crude unchanged for next month, suggesting that market supply tensions may have eased somewhat. Before the outbreak of the Iranian war, about one-fifth of the world's oil and liquefied natural gas was transported through the Strait of Hormuz to global markets. This week, spot liquefied natural gas prices in Asia have surged to their highest levels in over three years, putting pressure on demand and budgets in some countries in the region due to high costs. Moreover, the rising global shipping costs following the upward trajectory of crude oil prices are primarily driven by a contraction in effective vessel supply and longer routes factoring in war risk insurance, rather than a sudden spike in global oil consumption. In the early stages of the U.S.-Iran war, the daily charter rates for Middle East-to-China Very Large Crude Carriers (VLCCs) soared to a record $423,736; although they have since retreated, forward freight rates for the fourth quarter of 2026 are still around $181,163 per day, more than double the $86,314 per day for U.S. Gulf of Mexico-to-China routes. Additional war insurance rates for navigation through the Strait of Hormuz have increased from 1%-3% of the vessel's value to 7.5%-10% as of July; if specific cargoes in the Red Sea are forced to change their routes, seasoned maritime shipping experts estimate that this could add around 10,000 nautical miles, 34 days of transit time, and over $5 million in freight costs, not including fuel and insurance costs.