Oil Prices Continue Gains Amid Renewed US-Iran Strikes - Sarmad

Oil prices rose 0.8 percent in early trading on Wednesday, continuing the previous session’s jump, as fears of supply disruptions mounted after the United States and Iran exchanged strikes overnight, dispelling hopes of a rapid de-escalation of tensions in the Middle East.

Brent crude futures rose 75 cents, or 0.8 percent, to $95.40 a barrel by 0345 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 44 cents, or 0.5 percent, to $90.66 a barrel. Both benchmarks surged by more than $4 on Tuesday, marking their largest gains since July 24 for Brent and July 23 for WTI.

The United States said it carried out a series of airstrikes on targets in Iran overnight, prompting Iran to retaliate in the most serious escalation of the conflict between the two countries in weeks.

The Iranian Revolutionary Guard stated that U.S. attacks would further restrict navigation through the Strait of Hormuz, a vital waterway through which roughly one-fifth of global oil consumption previously passed, effectively closing it to commercial shipping.

Analysts at ING wrote in a client note, “Recent developments have brought regional oil supply risks back into focus… We have seen oil flow through the Strait of Hormuz despite the stalemate between the U.S. and Iran, but rising tensions clearly endanger transit.”

The Revolutionary Guard also said it targeted a U.S. military base in Jordan with ballistic missiles, claiming they killed a large number of U.S. troops, while Iranian state media reported a large-scale drone attack on a U.S. base in Bahrain in response to U.S. strikes.

The Jordanian military said its air defenses intercepted 10 of the 13 ballistic missiles that entered its airspace, while two U.S. officials said there were no reports of U.S. casualties from the attacks. Separately, Kuwait announced that its armed forces were countering hostile drone activity.

The latest exchange of strikes followed an escalation in fighting over the weekend, the first since July, and after attacks on two oil tankers departing the Strait of Hormuz on Monday, which further disrupted oil supplies and forced traders to seek alternative crude shipments.

“Oil markets are no longer pricing in only the risk of war, but increasingly the cost of an unresolved conflict,” said Priyanka Sachdeva, head of market outlooks at Philip Nova.

She added, “Until there is clear evidence that negotiations can lead to a lasting resolution and that normal oil flows through the strait are returning, we expect the risk premium in crude prices to remain elevated.”

In the United States, the world’s largest oil producer, market sources citing data from the American Petroleum Institute reported that crude inventories fell by 2.6 million barrels in the week ending August 28, while distillate inventories, which include diesel and heating oil, declined by 265,000 barrels.