Oil prices rose 1% as the Middle East crisis disrupted supply and risks escalated further
Geopolitical factors remain the most important driving force in the short term. Oil prices rose 1% on Wednesday as the US-Israeli war against Iran disrupted Middle East supply, but prices were pressured by Trump raising the possibility of the US Navy escorting ships through the Strait of Hormuz.
Brent crude rose $1.17, or 1.4%, to $82.57 a barrel as of 04:08 GMT, after closing at its highest level since January 2025 on Tuesday.
WTI rose 72 cents, or 1%, to $75.28 after closing at its highest level since June. Both have increased by approximately 5% or more in the last two sessions.
Currently, geopolitics is overshadowing key price-determining factors such as inventory data, US economic figures, or OPEC statements.
Key short-term indicators to watch include physical export data from the Gulf, confirmed tanker incidents, the extent of US naval support, and Iranian rhetoric.
Israeli and US forces attacked targets across Iran on Tuesday, including attacks on energy infrastructure in the region, which accounts for roughly one-third of Iran's global oil production.
Iraq, OPEC's second-largest crude oil producer, has cut its production by about 1.5 million barrels per day, or about half, due to storage limitations and the lack of an export route. The country will be forced to halt its production of approximately 3 million barrels per day within days if exports do not resume.
As part of its resistance, Iran has also targeted tankers in the Strait of Hormuz, through which about one-fifth of the world's oil and liquefied natural gas flows. The Strait is effectively closed.
Trump said the U.S. Navy could escort oil tankers through the Strait of Hormuz if necessary, and added that he had instructed the U.S. International Development Finance Corporation to provide political risk insurance and financial guarantees for maritime trade in the Gulf.
The promise of such guarantees comes after insurers canceled war risk coverage for ships passing through the Strait of Hormuz. This is welcome news if it is not exploited by some financially distressed shipowners, but it won't happen overnight. Navy escorts would be beneficial, but it will still take time.
Countries and companies have begun searching for alternative routes and supply sources. India and Indonesia have turned to other energy sources, and some Chinese refineries are shutting down or accelerating maintenance plans. But all these measures and activities are time-consuming processes.
In the United States, crude oil inventories rose by 5.6 million barrels last week, far exceeding analysts' estimates of 2.3 million barrels, according to market sources citing figures from the American Petroleum Institute (API). Official figures from the US government will be released later on Wednesday.
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