Still, experts think peace negotiations will continue - along with volatility: File Image/Pixabay.

Investors who maintained a remarkable resolve in betting that the U.S. and Iran would reach a peace settlement – despite  pundits insisting such an agreement was unrealistic - received a rude awakening on Tuesday and caused oil prices to leap by over 5 percent, following Iranian strikes in the Strait of Hormuz and major counterstrikes by U.S. forces.

As of 18:10 EST Tuesday, U.S. strikes on Iran remained ongoing, with targets including air defence systems, coastal surveillance systems, surface-to-air missiles sites, drone launch sites, post facilities, and other infrastructure.  

This, in addition to Washington revoking its waiver on Iranian oil sanctions, was in response to Iran striking three commercial ships, including a Saudi Arabia and a Qatar tanker, in the Hormuz between Monday and Tuesday.

Iran reportedly regarded the counterstrike as a violation of the 60-day memorandum of understanding between the U.S. and the Islamic republic; Iran’s deputy foreign minister Kazem Gharibabadi said his country “will take decisive actions to safeguard its national interests and security.”

After touching session highs of over 5 percent, Brent settled up $2.17, or 3.01 percent, to $74.16 per barrel, while West Texas Intermediate settled up $1.89, or 2.76 percent, ‌to $70.44 per barrel.

While pundits debated whether Iran's actions were to exert authority in the Strait or a show of strength during mourning for ⁠its slain supreme leader Ayatollah Khamenei, Bob Yawger, director of energy futures at Mizuho, conceded that "Obviously today is the next level of breakaway from the memorandum of understanding."

However, he went on to add that "I don't think it's in either side's interest not to get a deal done."

Ajay Parmar, director of ⁠energy and refining at ICIS, said, “We firmly believe that volatility really is here to stay" and justified his remark by pointing out that "Just one disagreeable message from one side could bring anger to the other, and remember ⁠if Iran merely threatens to close the Strait of Hormuz again, prices will spike considerably.”

In other oil news on Tuesday, the American Petroleum Institute estimated that U.S. crude inventories fell by 399,000 barrels in the week ending July 3, compared to a 6 million barrel drop the week prior; gasoline fell by 2.9 million barrels, comparable to the drop the week prior, and distillates fell by 1.8 million barrels after gaining 2.9 million barrels the week prior.

Also on Tuesday were reports that Ukraine drone strikes knocked out Gazprom Neft’s Omsk gasoline refinery, Russia’s largest such facility whose output is 440,000 barrels per day (bpd).

The attack, which came amid worsening fuel shortages in the former Soviet Union, set fire to the CDU-10 crude distillation unit, which accounts for about 38 percent of the refinery's processing capacity; a second major unit was also shut down after damage to supporting infrastructure.