Oil prices rise as US-Iran uncertainty and shipping attacks raise supply concerns

Global oil prices advanced on Wednesday as uncertainty surrounding a potential peace agreement between the United States and Iran,

BEIJING: Global oil prices advanced on Wednesday as uncertainty surrounding a potential peace agreement between the United States and Iran, coupled with attacks on commercial shipping in key Middle Eastern waterways, heightened concerns about disruptions to crude supplies.

At 0553 GMT, Brent crude futures had gained 75 cents, or 0.84%, to reach $89.66 per barrel. US West Texas Intermediate (WTI) crude rose 72 cents, or 0.87%, to $83.92 a barrel. Both benchmarks had climbed by more than $1 earlier in the session.

The latest gains followed a strong rally on Tuesday, when both Brent and WTI settled more than $1 higher, reaching their highest closing levels since July 31.

Oil prices had already surged around 5% on Monday as market participants became increasingly sceptical about the prospects of a US-Iran agreement to end the conflict. Concerns intensified after US President Donald Trump issued a fresh demand that Iran compensate people killed in wars, attacks and protests.

Market analysts said the latest developments have left energy markets highly sensitive to changes in the US-Iran narrative.

“The Middle East is increasingly becoming a seesaw between ‘deal’ and ‘war’,” said Priyanka Sachdeva, head of market insights at Phillip Nova in Singapore, describing the resulting price swings as a pendulum moving between roughly $70 and $90 a barrel.

Shipping Disruptions Add to Market Pressure

Concerns over the safety of crude shipments were also reinforced after the United States and Yemen’s Iran-aligned Houthis reported separate attacks involving shipping in the Strait of Hormuz and the Bab el-Mandeb Strait.

The Strait of Hormuz is one of the world’s most important energy transit routes, making any prolonged disruption there a major concern for global oil markets.

Iranian security official Mohsen Rezaei said the strategic waterway would remain closed unless Washington accepted Tehran’s conditions for ending the conflict. Those demands reportedly include the release of frozen Iranian assets and an end to other regional conflicts.

Trump, meanwhile, has continued to send mixed signals about the US response, alternating between warnings of a tougher military approach and suggestions that an agreement could still be reached.

The uncertainty has contributed to sharp swings in crude prices as traders attempt to assess whether the conflict will escalate or move towards negotiations.

Sachdeva said markets could increasingly become accustomed to the frequent changes in the geopolitical narrative, creating a highly volatile environment for short-term traders and speculators.

Hormuz Traffic Falls Sharply

Shipping data highlighted the scale of the disruption. The number of vessels passing through the Strait of Hormuz fell to only eight on Tuesday, according to shipping data cited in market reports.

That compares with an estimated 125 to 140 vessels a day before the conflict, underscoring the extent to which security concerns have affected maritime traffic through the strategic waterway.

A sustained reduction in shipping through Hormuz could have significant implications for global energy markets because the route handles a substantial share of international oil shipments.

US Crude Inventories in Focus

Despite geopolitical concerns, developments in the United States provided a counterweight to the bullish sentiment.

A Reuters poll released on Tuesday had indicated that US crude and fuel inventories were expected to decline during the week ended August 7. However, market sources citing data from the American Petroleum Institute (API) reported a substantial increase in US crude stocks.

According to the sources, US crude inventories increased by approximately 9.1 million barrels last week. Gasoline stocks declined by around 1.5 million barrels, while distillate inventories fell by approximately 596,000 barrels.

The reported crude build was considerably larger than market expectations.

If confirmed by official figures, the increase could ease concerns over tightness in the US oil market and potentially limit further price gains.

Haitong Futures said in a market note that the unexpectedly large increase in crude inventories could reduce some of the supply-related pressure currently supporting oil prices.

EIA Data Awaited

Investors are now awaiting official inventory figures from the US Energy Information Administration (EIA), the statistical arm of the US Department of Energy.

The EIA’s weekly petroleum report is scheduled for release at 10:30 a.m. Eastern Time (1430 GMT) on Wednesday.

Market participants will closely examine the data for signs of changes in crude production, refinery activity, gasoline demand and commercial inventories. Any significant deviation from the API figures could trigger additional volatility in oil prices.

Longer-Term Supply Risks Remain

Beyond the immediate market reaction, longer-term concerns over Middle Eastern supply disruptions continue to provide support to crude prices.

The EIA has estimated that disruptions to Middle Eastern crude supplies could amount to approximately 600,000 barrels per day and persist through the end of 2027.

With geopolitical tensions still unresolved and shipping activity through major regional waterways significantly reduced, traders are expected to remain highly sensitive to developments involving the United States, Iran and regional armed groups.