Iran Says It Set Two Tankers Ablaze as Brent Hit a Five-Month High and Traders Bet on Pricey Oil Into 2027

Iran's Revolutionary Guard said Tuesday that two "non-compliant" oil tankers were set ablaze in the Strait of Hormuz after hitting mines laid by its navy. The claim, carried by Iran's Tasnim news agency and not independently verified, landed as Brent crude touched $111.99 a barrel, its highest in five months, CNBC reported.

The bigger signal is further out on the curve. Iran's campaign against shipping, with at least 18 vessels attacked in two weeks according to ship tracker Kpler, plus Houthi strikes on Saudi Arabia, has the market pricing expensive oil for a long time. Contracts for next year hit record highs, "implying an extended period of high oil prices deep into 2027," Deutsche Bank analysts said, per NBC News. The midterms are two weeks away.

A spike, then a pullback

Brent did not hold its peak. December futures were down 1% at $108.31 later Tuesday, and November WTI, which expires that day, slipped 0.9% to $102.75 after touching $110.48. Traders were hoping for diplomatic progress between Washington and Tehran, and weaker-than-expected US housing starts took some heat out of the rally.

The front end still tells the story. PVM's Tamas Varga said WTI strength "is a reflection of falling export volumes from the Middle East as tanker attacks and Houthi strikes on Saudi oil infrastructure intensify." ING said the market "is pricing in a significant risk premium, given the situation's volatility."

Shipping is where that premium shows up most. Chartering a large tanker through Hormuz now costs four times what it did in September, much of it a risk premium for crews and insurance. Those costs have started to cancel out the extra supply from more ships moving through the strait.

The map keeps widening

On Monday the Houthis said they hit an Aramco site in Yanbu, the Shaybah oilfield, Riyadh's King Khalid International Airport and Abha airport. Saudi authorities did not confirm the attacks and Reuters could not verify them. A separate Houthi attack on a government security forces training camp in Yemen's Shabwa province killed 58 people the same day.

Saudi Arabia has postponed its Future Investment Initiative conference to next year because of the attacks. Last Friday, UK maritime authorities reported two tankers hit in the Persian Gulf off Al Jubayl, one by a rocket-propelled grenade fired from a small boat. Britain said Tuesday it will start flying fighter jets over Saudi Arabia to help guard against more Houthi strikes.

Tehran is warning Washington off. Foreign Ministry spokesperson Esmaeil Baqaei said Iran would answer any American strike "in equal measure, if not more forcefully." President Trump has said US forces will not attack Iran before the Nov 3 midterms, and Deutsche Bank noted the ship attacks have fed investor speculation that the administration is more likely to escalate afterward.

Russia as a partial offset

Washington has opened one relief valve. After Trump waived the Graham Act sanctions on Russia and its oil buyers over Republican objections, Russian diesel cargoes are heading back to their usual destinations. Varga said exempting Russia's shadow fleet could push freight rates lower and put US crude grades "back in play as replacements of Mideast crude oil." Ukrainian drones, meanwhile, set fire to an oil terminal in St Petersburg on Sunday.

Gas prices on the ballot

For voters, this is about the pump. In an NBC poll, 67% of US adults called gas prices a very or somewhat serious problem. The national average for unleaded sits at $4.28 a gallon and was on pace for a one-month low, but higher crude is likely to upend that as it filters through to the pump.

"The 2027 contracts are moving higher as well as the possible reality of higher for longer oil prices sink in," said Peter Boockvar of OnePoint BFG Wealth Partners.

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