Oil prices rose on Wednesday as uncertainty over a potential peace deal between the United States and Iran, alongside attacks on shipping in key Middle East waterways, heightened concerns about disruptions to regional crude supplies.
Brent crude futures gained 75 cents, or 0.84%, to $89.66 a barrel by 5:53 a.m. GMT, while U.S. West Texas Intermediate (WTI) crude rose 72 cents, or 0.87%, to $83.92. Both benchmarks had gained more than $1 earlier in the session.
The gains followed increases of more than $1 on Tuesday, when both contracts recorded their highest closing levels since July 31.
Oil prices had surged about 5% on Monday as expectations for a U.S.-Iran peace agreement weakened following a new demand from U.S. President Donald Trump that Iran provide compensation for people killed in wars, attacks and protests.
The uncertainty has left oil markets highly sensitive to developments surrounding the conflict and the security of major shipping routes.
“The Middle East is increasingly becoming a seesaw between ‘deal’ and ‘war’, keeping oil prices swinging like a pendulum between $70 and $90 a barrel,” said Priyanka Sachdeva, head of market insights at Phillip Nova in Singapore.
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 on Tuesday.
Iranian security official Mohsen Rezaei said the Strait of Hormuz would remain closed unless the United States accepted Iran’s conditions for ending the conflict, including the release of frozen Iranian assets and an end to other regional conflicts.
Trump, meanwhile, said the United States could either allow Iran to continue operating without major intervention or “hit them really, really hard”.
The U.S. president has alternated between threats of escalation and suggestions that a peace agreement could be reached, adding to uncertainty in oil markets.
Market participants are closely monitoring traffic through the Strait of Hormuz, one of the world’s most important oil shipping routes. Shipping data showed that the number of vessels transiting the waterway fell to a one-week low of eight on Tuesday.
Before the conflict, around 125 to 140 vessels passed through the strategic waterway each day.
Despite the geopolitical risks, rising U.S. crude inventories provided some counterweight to the bullish pressure on oil prices.
A Reuters poll had indicated that U.S. crude and fuel inventories were expected to decline during the week ended August 7.
However, market sources citing American Petroleum Institute data said U.S. crude inventories increased by about 9.1 million barrels during the week. Gasoline inventories fell by 1.5 million barrels, while distillate stocks declined by 596,000 barrels.
The reported crude build was significantly larger than expected and could ease concerns about tight supplies if confirmed by official data.
Haitong Futures said in a note that the large increase in U.S. crude inventories could reduce market concerns over supply constraints.
Official inventory figures from the U.S. Energy Information Administration are due later on Wednesday.
In the longer term, the EIA expects disruptions of around 600,000 barrels per day to Middle East crude oil supplies to continue through the end of 2027.
The competing forces of geopolitical uncertainty and rising U.S. inventories are leaving oil markets highly volatile, with traders closely watching developments around the U.S.-Iran conflict, shipping activity through strategic waterways and upcoming inventory data.
