Oil prices extended gains Tuesday as traders mulled the threat of escalation, following the resumption of U.S.-Iran military strikes and more turmoil in the Strait of Hormuz.

A tanker was struck by three unknown projectiles while transiting Hormuz on Monday, according to an incident report from the the U.K. Maritime Trade Operations Centre.

Brent

The tanker was sailing in the southern shipping lane close to the Omani coast, the UKMTO said, adding that no casualties were reported.

Iran launched an attack on two American bases in Jordan on Monday in retaliation for the U.S. strike on its Larak Island. American forces targeted two Iranian rocket launchers on Larak Island on Sunday, reportedly killing three, saying that Tehran intended to launch rockets carrying sea mines into the Hormuz Strait.

The small island, located in the strait, has been a critical military and shipping control point for Iranian forces, helping them keep a firm grip on vessel traffic through one of the world’s most critical maritime routes.

Iranian President Masoud Pezeshkian told the Shanghai Cooperation Organisation Summit on Tuesday that Tehran would immediately reciprocate if Washington agreed to return to its commitments under the interim deal signed in June, according to the Iranian Student News Agency.

The back-and-forth hostilities marked the first time that the U.S. and Iran traded strikes in over a month.

While neither side appeared to be seeking a return to full-scale war, both signaled they were prepared to respond to further attacks. “We are going to hit them hard,” President Donald Trump told Fox News on Monday, saying that “there will be a response” to Iran’s attacks on U.S. military bases in the region.

Analysts largely view the U.S. strike on Larak Island as an attempt to break a deadlock rather than a shift in strategy. “By hitting the launchers rather than broader Iranian military infrastructure, the U.S. appears to be punishing a specific behaviour rather than, at least for now, broadening its war aims,” said Ali Vaez, deputy program director at International Crisis Group.

“It is enforcing the blockade,” said Jason Brodsky, policy director of United Against Nuclear Iran, adding that the Trump administration’s goal was to further degrade Tehran’s capabilities to mine the Strait of Hormuz, while focusing on economic coercive measures as the midterm elections approach.

Washington has ramped up pressure to squeeze Iran’s already-torn economy with “secondary sanctions” that punish nations and businesses buying Iranian crude oil. U.S. Treasury Secretary Scott Bessent said Monday, on the sidelines of the Group of 20 finance ministers gathering, that Iran was “lashing out kinetically” because the new sanctions were taking a toll on its economy.

Speaking from the Oval Office on Monday, Trump reportedly said Iran’s financial systems, armed forces, and governing body have been largely degraded. “It doesn’t mean we won’t smack them to see what happens,” the president said.

The war, now stretching into its seventh month, has disrupted global energy supplies and sent shock waves through global financial markets.

“This is fundamentally an endurance contest,” said Brodsky, as Trump has demonstrated an “unpredictability” that should concern the Iranians, and Tehran may lash out more aggressively militarily as the economic pressure mounts.

Federal Reserve Governor Michael Barr stated Tuesday that he would be willing to back an interest rate increase if inflation fails to come down.

Addressing a banking forum in Washington, the policymaker expressed concern over “broader price pressures taking hold,” noting that inflation has lingered above the Fed’s 2% target for nearly 5½ years.

“If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance,” Barr said in prepared remarks. “However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates.”

The remarks arrive at a pivotal moment for policy amid a wider environment of persistent inflation and climbing Treasury yields. As a governor, Barr holds a permanent voting seat on the rate-setting Federal Open Market Committee.

Amid renewed concerns over the volatile Middle East situation, yields climbed again Tuesday, with the benchmark 10-year note reaching a level not seen since mid-January 2025.

Meanwhile, Fed Chairman Kevin Warsh last week delivered remarks that markets broadly read as leaning toward a rate hike, possibly as early as the next policy meeting in two weeks. Barr backed the July decision to hold the benchmark funds rate at 3.5%-3.75%, but markets Tuesday morning were pricing in roughly a 66% probability of an increase this month, according to the CME Group’s FedWatch.

Barr gave the economy positive marks even with inflation running high.

“Consumer spending to date has been largely resilient,” he said. “But inflation remains too high — and has been for over five years,” he added.

The latest data indicated headline prices up 3.7% over the past year, or 3.3% excluding food and energy. The Fed will receive one additional look at inflation when the consumer and producer price indexes are published next week.

August has delivered strong performance for equities, yet those looking to set aside savings this autumn can still earn attractive returns through certificates of deposit. Depositors are closely monitoring the Federal Reserve ahead of its September 15-16 policy meeting. Futures markets tied to the fed funds rate point to about a 65% probability that the central bank will lift its key lending rate by a quarter percentage point, bringing it to a range of 3.75% to 4%. Speaking in Jackson Hole, Wyoming late last week, Fed Chairman Kevin Warsh expressed his concerns over persistent inflation. He remarked that “while this summer’s [inflation] readings were better than expected, they do not tell me that underlying trends have meaningfully improved.” In fact, the July personal consumption expenditures price index climbed at an annual pace of 3.7%, exceeding the Dow Jones consensus forecast by 0.1 percentage point and remaining well above the central bank’s 2% inflation goal. Although rising rates pose challenges for borrowers, they present opportunities for savers who can take advantage of stronger yields on instruments like certificates of deposit. A number of banks, for instance, continue to price their CDs competitively and offer appealing yields as they vie for customer deposits. Recent move Just last week, Sallie Mae raised the annual percentage yield on its one-year CD by five basis points, bringing it to 4.2%. This adjustment places Sallie Mae’s one-year CD rate roughly 25 basis points above the peer median APY of 3.95%, according to Vincent Caintic, analyst at BTIG. One basis point equals 1/100th of a percent, or 0.01%. Other financial institutions also continue to feature attractive rates on their one-year CDs. Popular Direct offers an APY of 4.25% on its 12-month CD, as of Monday afternoon, while CIBC advertises a 4.15% yield. Savers can also discover appealing rates if they’re open to terms beyond 12 months. 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