Crude oil prices climb to six-week high with Brent above $95 amid escalating US-Iran war. What's the near-term outlook?

US-Iran war: Oil prices climbed more than 1.5% on Thursday, 23 July, reaching their highest levels in over six weeks, after the United States launched fresh strikes on Iran and Yemen's Houthi rebels targeted oil tankers in the Red Sea.

Brent crude futures advanced $1.93, or 2%, to $96 per barrel, marking their highest level since June 8. The benchmark had settled at $94.07 in the previous session, up more than $3 and just below a six-week high.

Meanwhile, US West Texas Intermediate (WTI) crude gained $1.44, or 1.7%, to $88.27 per barrel, extending Wednesday's nearly 3% rally.

The United States military said it conducted a 12th straight night of strikes on Iran, shortly after US President Donald Trump vowed to target an Iranian bridge or power plant every time Tehran attacks a ship transiting the Strait of Hormuz, further intensifying the conflict.

Iran's Revolutionary Guards claimed an oil tanker caught fire following an explosion while attempting to navigate what they described as a mined route south of the Strait of Hormuz. They added that two other tankers were forced to turn back.

The Guards asserted that the Strait of Hormuz remains under their control and is "completely closed" as long as US military operations continue in the region, warning that no vessel would be permitted to enter or exit without coordination with Iran.

The conflict has also widened beyond the Strait of Hormuz, with the Iran-backed Houthis threatening to target ships transporting Saudi oil through the Bab el-Mandeb Strait and announcing a naval blockade of Saudi Arabia.

The Houthis said they had launched attacks on two Saudi oil tankers, while maritime security reports indicated that one of the vessels identified by the group, the Saudi-flagged tanker Encelia, was struck in the Red Sea.

The group also claimed it had compelled around 10 vessels to reverse course after warning ships against sailing to Saudi ports. However, Reuters could not independently verify the claim.

The Houthi blockade in the Red Sea, coupled with warnings from Iran's Revolutionary Guards that the southern route of the Strait of Hormuz has been mined, has heightened concerns over potential disruptions to global energy supplies.

Meanwhile, in the United States, crude oil inventories increased by 2 million barrels last week, according to the Energy Information Administration. The rise came as refinery activity slowed, crude exports declined and imports increased, contrasting with analysts' expectations in a Reuters poll for a drawdown of 1.1 million barrels.

According to Kaynat Chainwala, AVP Commodity Research, Kotak Securities, Backwardation has deepened in tandem, with the prompt-to-second-month spread widening to $3, reflecting near-term availability concerns outweighing longer-dated fundamentals

“With Hormuz, the Red Sea and the Black Sea all flashing disruption signals simultaneously, physical supply has not yet been meaningfully curtailed, but the risk premium is building quickly. Any fresh escalation across these chokepoints could pave the way for $100 Brent in the sessions ahead,” said Chainwala.

Meanwhile, on the technical outlook, Ponmudi R, CEO of Enrich Money, said that US Oil is trading with a positive bias above the $85 mark, supported by ongoing geopolitical tensions.

“Immediate resistance is placed at $86.5–$87, followed by the $88–$88.5 zone. On the downside, immediate support is seen at $84.5–$84, and a break below this level could drag prices toward the $82 mark. Overall, the near-term outlook remains positive, with geopolitical developments likely to dictate the next directional move,” said Ponmudi.