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Oil prices rose on Tuesday after the U.S. bombed Iran for the third consecutive day and the Islamic Revolutionary Guard Corps attacked at least two tankers transiting the Strait of Hormuz.
U.S. West Texas Intermediate futures rose 3% to $80.55 per barrel by 8:47 a.m. ET. Brent futures, the international benchmark, jumped 4.3% to $86.85.
The U.S. military bombed military targets along Iran's coast Monday night in an effort to degrade Tehran's ability to attack commercial ships, according to U.S. Central Command.
Iran's Revolutionary Guard said its forces attacked two supertankers transiting Hormuz with their transponders turned off. The United Arab Emirates' state oil company ADNOC said two of its tankers were hit by projectiles while transiting the strait, killing one mariner and injuring several others.
The U.S. Navy will reimpose its blockade against Iranian ships at 4 p.m. ET on the orders of President Donald Trump, Centcom said in a statement.
Trump said Monday the U.S. military will keep Hormuz open but he demanded payment equal to 20% of the value of all cargo shipped through the strait.
Citi warned that Trump's proposal to impose shipping fees in the Strait of Hormuz materially raises the risk of further military escalation.
"The possibility that the Iranian regime walks away from the MoU until after the mid-term US elections has also risen, a scenario which would most likely see higher for longer oil prices," the bank wrote in a report published early Tuesday.
Roughly one-fifth of global oil supplies passed through the Strait of Hormuz before the U.S. and Israel launched strikes on Iran on Feb. 28. Shipping traffic slumped after Iran began targeting vessels in the waterway in early March, but had started to recover following Washington and Tehran's interim agreement.
