Oil prices climbed more than 3% on Wednesday after renewed military action involving the United States, Saudi Arabia and Iran heightened concerns over global crude supplies, while declining U.S. oil inventories added further support to the market.
By 08:24 GMT, Brent crude futures had risen $3.04, or 3.6%, to $87.13 a barrel. U.S. West Texas Intermediate (WTI) crude advanced $2.80, or 3.5%, to $82.06 a barrel.
According to UBS analyst Giovanni Staunovo, “Renewed military strikes in the Middle East and Iranian officials reiterating that they want to control shipping activity through the Strait of Hormuz amid depressed oil flows through the Strait are lifting oil prices again.”
Fresh Military Action Raises Supply Risks
Oil markets reacted after the United States and Saudi Arabia carried out strikes against Iran-backed groups in Iraq, blaming them for recent drone attacks on Saudi energy infrastructure.
The military operation followed the interception of Iranian ballistic missiles aimed at U.S. forces stationed in the region, adding to fears that the conflict could expand further.
Diplomatic progress also stalled after an Iranian official told Reuters that Tehran had rejected Oman’s proposal for joint regional oversight of the Strait of Hormuz, dimming hopes for an agreement that could restore normal shipping through one of the world’s most important energy routes.
Shipping Through Hormuz Remains Limited
Only a handful of commodity vessels crossed the Strait of Hormuz during the week, highlighting the continued disruption to Gulf trade.
Meanwhile, shipping through the Bab el-Mandeb Strait increased, with five vessels passing through on Wednesday after 39 made the journey on Tuesday, the busiest day since July 19, before Yemen’s Iran-backed Houthi movement announced a blockade targeting Saudi Arabia.
DBS Bank expects oil markets to remain highly volatile.
Suvro Sarkar, Head of Energy Research at DBS Bank, said: “We believe Brent oil prices will continue to whipsaw in the $80-$100 per barrel range in the near term as the conflict ebbs and flows in the Middle East.”
He added that geopolitical tensions have worsened despite earlier indications from U.S. President Donald Trump that diplomatic efforts could resume.
“This series of stop-start negotiations means a complete removal of the Strait of Hormuz blockade is not achieved, and oil prices could see higher floor of around $80 per barrel even under a de-escalation scenario.”
Lower U.S. Stockpiles Support the Rally
Crude prices also found support after market sources, citing American Petroleum Institute data, reported that U.S. oil inventories declined by around 3.3 million barrels during the week ended July 24.
Traders are now awaiting official inventory figures from the U.S. Energy Information Administration later on Wednesday.
Further bullish sentiment came from expectations that OPEC+ may suspend planned production increases for three months beginning in October after completing the scheduled return of previously withheld output.
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