Oil prices surged in early trading Tuesday as energy markets adjusted to what analysts described as a new normal in the Middle East, threatening to drive up the cost of gasoline in the United States just two weeks before the midterm elections.
U.S. crude prices jumped as much as 5% to reach approximately $109 a barrel, marking their highest level since April. Meanwhile, international Brent crude climbed 1.5% to exceed $111 a barrel, hitting its highest point since May. Prices later pulled back during morning trading after weaker-than-expected U.S. housing starts raised the prospect of a broader economic slowdown and subsequent lower demand.
Despite the mid-morning correction, long-term market expectations shifted significantly. Prices for advanced oil contracts dated for next year hit record highs, signaling an extended period of elevated energy costs stretching deep into 2027. Analysts with Deutsche Bank noted that 2027 contracts are climbing as the reality of higher-for-longer oil prices sinks in. Peter Boockvar, chief investment officer of One Point BFG Wealth Partners and author of the Boock report, echoed that sentiment in a Tuesday note.
The timing of the price spike brings energy costs back to the forefront of American politics. High gas prices have emerged as a major concern for voters as Republicans face dwindling odds of maintaining control of Congress in the upcoming midterms. A recent NBC News poll found that 67% of U.S. adults view gas prices as a very serious or somewhat serious problem, with a majority reporting that current economic conditions have forced them to alter their spending habits. Prior to Tuesday’s market movement, national average prices for unleaded gasoline had started the week lower at $4.28 a gallon, pacing toward their lowest level in a month. Analysts expect those downward trends to be quickly upended as higher crude prices filter through to the pump.
Several distinct factors drove Tuesday’s sharp increases. Most notably, the cost of chartering a large tanker vessel to transport oil through the Strait of Hormuz has quadrupled since September, according to shipping data. Market observers indicate that much of that cost increase represents a risk premium covering sailors and insurance. According to a Monday note from ship-tracking group Kpler, at least 18 vessels have been attacked in the strait over the past two weeks. These soaring transport costs have begun to offset a recent bump in supply driven by an increasing number of ships navigating the waterway.
Beyond shipping disruptions, the broader geopolitical landscape added further upward pressure on commodities. Deutsche Bank analysts reported that Iranian attacks on shipping have fueled investor speculation that the administration could escalate actions against Iran following the midterms. These regional hostilities broadened further on Monday when Iran-aligned Houthi rebels claimed responsibility for strikes targeting airports, energy infrastructure, and military sites in Saudi Arabia, alongside a security forces training camp in Yemen.
In response to the expanding security threat, the United Kingdom’s defense ministry announced Tuesday that it will begin deploying fighter jets over Saudi Arabia to help protect against further Houthi attacks. The introduction of another nation’s military assets directly into the regional conflict was viewed by markets as yet another indicator of escalating tensions.
