Oil prices rose over 2% in early Asian trade on Wednesday, as renewed military action between the US and Iran pushed energy prices higher, with markets raising concerns over supply disruptions through the Strait of Hormuz. 

The global benchmark Brent was up 1.94%, trading above the $96-per-barrel mark, while the US crude contract, West Texas Intermediate (WTI), was quoted near $92 per barrel. 

Renewed strikes between Washington and Tehran

Crude prices surged as Washington struck military targets in Iran, claiming that they had laid out mines in the Strait. This was followed by Tehran’s retaliatory action as Iran’s Revolutionary Guards Corps (IRGC) stated that they had hit US military bases in Jordan, Bahrain and Kuwait. 

The latest round of military strikes has intensified market fears over the prolonged West Asia conflict, which started in late February and hampered vessel movement through the Hormuz passage, which used to transit around one-fifth of the global energy supplies. 

IRGC has warned that more US military action could further halt tanker movement through the chokehold. 

“The key is whether this ignites further rounds of strikes from both sides, and whether it leaves shippers hesitant to navigate the Strait of Hormuz,” Wall Street Journal quoted ING commodities strategists Warren Patterson and Ewa Manthey as saying.

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Risk premium remains embedded

According to MUFG analysts quoted by MUFG, shipping conditions remain constrained near Hormuz, and a high risk premium will continue to be embedded in crude prices as exports through the waterway passage remain a key factor for the market.

Additionally, supply risks from Russia and Ukraine continue to mount pressure on crude prices, as Moscow was the third-largest producer of crude oil in 2025 after the US and Saudi Arabia. 

Increased bets on rate hike by Fed

The latest round of escalations has increased inflationary concerns as markets are increasingly weighing in the expectations of a rate hike by the US Federal Reserve at its September meeting. 

According to the CME Fedwatch tool, 67% of traders expect the central bank to hike rates by 25 basis points, compared to a 40% probability of a rate hike last week. For further cues, markets will watch out for key US economic data due on Friday.