Oil and gas stocks rallied Tuesday after U.S. Central Command announced strikes on Islamic Revolutionary Guard Corps targets in Iran. West Texas Intermediate crude jumped 4.7% to $90.46 a barrel, pushing energy equities higher while the broader S&P 500 fell 0.7%.

The market reaction followed overnight attacks on two oil tankers, one Saudi and one South Korean, in the Strait of Hormuz. No casualties or environmental damage were reported from the incidents.

Top Performers

Energy stocks with market capitalizations above $10 billion led gains during the session. Petrobras posted the strongest performance among the group, rising 4.96% to $20.31. Ecopetrol followed with a 4.83% increase to $17.48.

Prices are as of approximately 3:10 p.m. ET Tuesday.

Sector ETF Movements

The Energy Select Sector SPDR Fund rose 1.1%, outperforming the broader market. The SPDR S&P Oil & Gas Exploration & Production ETF climbed 1.8% to $192.39, reaching a 52-week high. In contrast, the VanEck Oil Services ETF remained flat, weighed down by a 3.7% drop in SLB, the largest oilfield services company.

Oil majors Exxon Mobil Corp. and Chevron Corp. gained 2.3% and 2.1%, respectively.

Bond Yields Rise

Higher oil prices raised inflation expectations, increasing the odds that the Federal Reserve holds or lifts rates. The 10-year Treasury yield rose to 4.80%, its highest level since January 2025. The two-year yield sat at 4.40%, also back at January 2025 levels.

Crude has climbed 57% from its Dec. 31 close of $57.42. Energy is up 44.8% this year against roughly 12% for the S&P 500.

What the Numbers Show

The divergence between exploration and production equities versus oilfield services highlights sector-specific sensitivities. While the XOP ETF hit a 52-week high driven by higher commodity prices, the OIH ETF was flat due to SLB's decline. This suggests that immediate geopolitical risk premiums are benefiting asset owners more than service providers with deep Gulf exposure.

U.S. crude oil futures settled at $90.22 per barrel, rising $4.46 or 5.20% as renewed U.S.-Iran fighting intensified supply concerns in global energy markets.

Market reaction to U.S.-Iran tensions

The escalation in hostilities between the U.S. and Iran has driven a sharp uptick in oil prices, with traders pricing in potential disruptions to crude supply flows. Geopolitical conflict involving Iran, a significant oil-producing nation, has historically been a key driver of volatility in energy markets.

Supply fears at the centre of price movement

Concerns over supply disruptions stemming from the U.S.-Iran conflict are the primary factor cited for the surge in oil futures. Any interference with crude production or transit routes in the region could have material implications for global supply availability, contributing to the upward pressure on prices reflected in the 5.20% gain recorded by U.S. crude.

Broader market context and diesel margins

U.S. oil prices topped $90 a barrel for the first time since late July following fresh American strikes on Iran. Trump stated the attacks were retaliation for Iran trying to mine the Strait of Hormuz and targeting a Jordan base. Two supertankers were hit while exiting Hormuz.

WTI rose 5.2% to settle at $90.22, while Brent was up 4.6% at $94.65. Despite the geopolitical tension, the rally stayed limited as exports keep moving through Hormuz. Diesel margins hit a record high during this period.

Crude is up more than 55% this year. However, Bessent dismissed the Strait as soon to be a 'worthless piece of water' bypassed by pipelines.

What the Numbers Show

The divergence between the sharp daily gains in WTI (5.2%) and Brent (4.6%) alongside the statement that exports continue to move through Hormuz suggests that while immediate panic buying drove prices, physical supply constraints remain limited. The record diesel margins indicate refining capacity is still operational, even as geopolitical premiums inflate crude costs.