U.S. crude oil hovers at two-month high amid fears of Israel-Hezbollah war and Hurricane Beryl

An oil pump jack is shown in a field in Stanton, Texas, on June 27, 2024.Brandon Bell | Getty Images News | Getty Images

U.S. crude oil on Tuesday hovered at a two-month high as worries grow that Israel and the Iran-backed militia Hezbollah could go to war, and Hurricane Beryl could impact Gulf Coast refineries.

As oil has rallied in recent days, gasoline prices have hit a $3.50 per gallon average ahead of the Fourth of July holiday, according to the motorist association AAA. Prices at the pump are 3 cents higher than last week but still lower than last month.

West Texas Intermediate crude hit a high of $84.38 earlier in the session, the highest level since April 26. Brent rose to $87.46 earlier, the highest level since April 30.

Here are today's energy prices:

• West Texas Intermediate August contract: $83.43 per barrel, up 5 cents. Year to date, U.S. crude oil has gained 16.5%.
• Brent September contract: $86.78 per barrel, up 18 cents, or 0.21%. Year to date, the global benchmark is ahead by 12.7%.
• RBOB Gasoline August contract: $2.59 per gallon, up 0.64%. Year to date, gasoline has advanced 23.3%.
• Natural Gas August contract: $2.43 per thousand cubic feet, down 1.86%. Year to date, gas is down 3.2%.

Rising gasoline prices will likely continue into Fourth of July and could hit $3.69 per gallon in the coming weeks if the oil rally continues, Patrick De Haan, head of petroleum analysis at GasBuddy, wrote on social media Tuesday.

"I expect the national retail price of gasoline to increase 5 to 10 cents per gallon over the next 7 days," Andy Lipow, president of Lipow Oil Associates, said in a note Tuesday.

Oil prices gained 6% last month after sagging in May as geopolitical risk entered the market again. Eighteen Israeli soldiers were injured Sunday in a drone attack launched by the Iran-backed militia Hezbollah, according to the Israel Defense Forces.

Israel and Hezbollah have exchanged fire across the Lebanon border for months, but tensions have escalated in recent weeks as the two sides have threatened war. An Israeli invasion of Lebanon to push back Hezbollah could lead to a confrontation with OPEC-member Iran, analysts have warned.

Traders also worry that an early and active hurricane season could disrupt refineries and oil production along the U.S. Gulf Coast. Hurricane Beryl has strengthened into a Category 5 storm after making landfall on Grenada's Carriacou Island.

"While Hurricane Beryl is currently not a direct threat to USA crude oil production or refineries on the Gulf Coast, the National Hurricane Center is now showing a northerly turn on Sunday that could impact refineries in Corpus Christi," Lipow said.

There are five refineries in the Corpus Christi area with 942,000 barrels per day of capacity, which is 4.8% of total U.S. refining capacity, according to Lipow. With Gulf refiners operating at 90% to 95% to capacity, there is no slack in the system to make up for lost production if a significant number of refineries are shut down, Lipow said.

"Supply shortfalls are partially solved by drawing down inventories in the distribution system," Lipow said. "That results in depleting terminals of gasoline and ultimately the consumer sees the dreaded 'out of gas' signs at the pump."