Oil jumped in extended trading Tuesday after a report that Iran launched a second, previously undisclosed attack on U.S. Navy ships this week, pushing Brent crude above $99 a barrel. The escalation compounds a separate problem: shrinking global refining capacity has sent U.S. diesel and gasoline prices to record highs even before the latest strikes.
Iran's second wave of attacks
Brent crude climbed about 2% to $99.05 a barrel after closing at $97.92, while U.S. West Texas Intermediate crude rose 2.8% to $94.04 following an earlier settlement of $93.03. U.S. officials told The Wall Street Journal that Iran tried to attack Navy ships on Monday, after targeting an aircraft carrier with ballistic missiles over the weekend. However, the Pentagon has not publicly acknowledged the attempted Monday strike, and no U.S. ships were hit.
Iranian state media said a U.S. missile targeted a small oil tanker four miles from Kharg Island on Tuesday. That came days after the U.S. military struck three Iranian oil tankers on Saturday, which Iran's Foreign Ministry criticized in a statement. Iranian Parliament Speaker Mohammad Bagher Ghalibaf wrote on X on Monday: "Strike our assets and you get struck."
Saudi energy facilities hit
The war broadened this week as Iran-allied militants in Yemen attacked several energy facilities in Saudi Arabia, forcing a temporary halt to some operations. Yet the Saudi Foreign Ministry said Houthi militants targeted economic assets in Abha, Khamis Mushait, Jazan and Najran, injuring more than 70 civilians. In response, Goldman Sachs raised its Brent and WTI forecasts by $5 to $85 and $80 a barrel for December 2026, and the bank also warned Brent could climb above $120 a barrel in 2027 if Gulf crude output stays 4 million barrels a day below prewar levels, though that is not its base-case scenario.
Refining bottleneck adds pressure
Beyond the supply shock, shrinking refinery capacity is squeezing the broader crude oil market on its own. Global refinery capacity is running near 80 million barrels of fuels a day, down from a typical 86 million barrels for this time of year, according to Kpler analyst Matt Smith. He said more refineries in the Middle East and Russia are offline, while China has cut crude demand to prioritize its domestic fuel market.
As a result, American drivers paid the highest Labor Day gasoline prices on record, according to AAA, and retail diesel prices remain near a record $5.90 a gallon. That combination is fanning concerns about inflation as financial markets contend with a bond selloff and dollar weakness.
Shares of the three major U.S. refiners — Marathon Petroleum, Phillips 66 and Valero Energy — each closed at an all-time high Tuesday, even as broader U.S. stock benchmarks fell.
Sources: CNBC, MarketWatch
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