Oil prices moved sharply higher on Wednesday, building on strong gains from the previous two sessions as escalating hostilities between the United States, Israel and Iran intensified concerns about possible disruptions to global crude supplies.
At 03:40 ET (08:40 GMT), Brent crude futures for May delivery rose 3.5% to $84.25 per barrel, while U.S. West Texas Intermediate crude futures climbed 3.4% to $77.10 per barrel.
Both benchmarks had already finished nearly 5% higher on Tuesday, following roughly 7% gains earlier in the week. Brent prices also touched their highest level since July 2024.
Markets focus on supply risks
The conflict in the Middle East, which began over the weekend after coordinated U.S. and Israeli strikes on Iranian military targets killed Supreme Leader Ayatollah Ali Khamenei, continued to escalate on Wednesday. U.S. Admiral Brad Cooper, who commands American forces in the region, said more than 2,000 Iranian targets have been struck.
Iran has retaliated by launching missiles and drones toward neighboring Arab countries that host U.S. military bases. Tehran has also issued warnings to global shipping operators and targeted oil tankers moving through the Strait of Hormuz, a narrow passage that carries roughly one-fifth of global oil shipments.
The risk to traffic through Hormuz — a vital export route for crude from major producers such as Saudi Arabia, Iraq and the United Arab Emirates — has introduced a significant geopolitical risk premium into oil markets.
“The disruption to oil flows through the Strait is starting to affect oil flows further upstream,” ING analysts said in a note.
They also referenced reports indicating that Iraq has begun curtailing production at the Rumaila field, the country’s largest, as well as at West Qurna 2, with around 1.2 million barrels per day reportedly taken offline.
Goldman upgrades crude outlook for 2026
Goldman Sachs on Wednesday increased its second-quarter 2026 price forecasts, raising its expected Brent average by $10 to $76 per barrel and its WTI projection by $9 to $71.
The bank said its projections assume that reduced flows through the Strait of Hormuz could lead to sharp declines in OECD inventories and Middle Eastern oil production during March.
Goldman noted that risks around its forecast remain skewed to the upside, citing the possibility of prolonged export disruptions through the Strait and potential damage to oil production infrastructure.
“If Hormuz volumes were to remain flat for 5 additional weeks, Brent prices would likely reach $100, a level associated with larger demand destruction to prevent inventories from falling to critically low levels,” the bank said in a note.
That said, “the supply disruption tailwind could quickly turn into a demand destruction headwind. A prolonged conflict and sustained high prices may fuel oil-driven inflation and amplify economic risks stemming from renewed tariff uncertainty. That combination could weigh on consumption and ultimately pressure oil prices,” said Nikos Tzabouras, Senior Market Analyst at Tradu.com.
Trump signals support for tanker transit through Hormuz
Traders are also monitoring comments from U.S. President Donald Trump, who said the U.S. Navy could escort commercial vessels if required and promised government backing to help guarantee safe passage.
“The promise of such guarantees comes as insurers are cancelling war risk coverage for vessels moving through the Strait of Hormuz,” ING analysts wrote.
“This is welcome news, but clearly it won’t happen overnight,” they added.
Although the military escalation has provided strong support for oil prices, signs that governments are working to secure shipping routes could limit further gains in the short term.
Leave a Reply