Oil prices surged on Tuesday as global investors cope with the ongoing attempts to negotiate a truce in Gaza alongside the United States' pledge to step in against militants in the Middle East.

The US-UK strikes in Yemen fanned worries about a wider conflict in the oil-rich Middle East that could hit oil supplies
AFP

The West Texas Intermediate (WTI) contract for March experienced an increase of 52 cents, or 0.71%, amounting $73.30 a barrel. Simultaneously, the Brent contract for April was trading at $78.58 a barrel, showing a 0.73% rise of 57 cents.

Secretary of State Antony Blinken's vtrip to Egypt on Tuesday follows his meeting with the Saudi crown prince on Monday. Blinken is having a discussion with regional allies to secure a ceasefire in Gaza and stop the conflict from spreading into a wider regional crisis.

This diplomatic move comes in following United States' recent airstrikes against Iranian forces and allied militants in Iraq, Syria, and Yemen. The strikes were carried out in response to a drone attack in Jordan by Iran-allied militants that killed three U.S. troops.

"The bigger fear is a wider conflict, or Iran getting involved, which could seriously impact crude-oil supply through the Strait of Hormuz," expressed Tariq Zahir, managing member at Tyche Capital Advisors.

Tamas Varga, an analyst with oil broker PVM, emphasized that geopolitical tensions are tied to oil prices amid killing expectations for rapid interest rate cuts in the U.S. and concerns over the strength of China's economy.

Varga stated in a Tuesday note that the anticipated truce between Israel and Hamas has been contradicted by intense U.S. and UK strikes against Iranian-backed militant groups in Iraq and Syria, as well as attacks on Houthi groups in Yemen. He also highlighted that the heightened tensions could instigate renewed hostilities by the Houthis in the Red Sea, causing constant re-routing of oil traffic around the Cape of Good Hope.

As far as what to watch for this week, Tyler Richey, co-editor of Sevens Report Research mentioned that a rise in consumer demand for refined products metrics in the weekly Energy Information Administration report due out Wednesday would be a bullish development, while a return to record U.S. oil output would be "negative for prices in the near term."

Crude oil U.S.