Oil prices rose as fading hopes of a US-Iran peace deal and fresh attacks on ships in the Strait of Hormuz and Bab el-Mandeb fuelled concerns over prolonged disruptions to global crude supplies, despite a sharp rise in US oil inventories
Oil prices rose on Wednesday as fading hopes of a US-Iran peace deal and fresh attacks on ships in key regional waterways raised fears that disruptions to crude supplies could persist.
Brent crude futures gained 72 cents, or 0.81 per cent, to $89.63 a barrel, while US West Texas Intermediate (WTI) crude was up 71 cents, or 0.85 per cent, at $83.91.
Both benchmarks settled more than $1 higher in the previous session, marking their highest closes since July 31. The gains followed a roughly 5 per cent jump on Monday as hopes of a diplomatic breakthrough between Washington and Tehran began to fade.
The latest gains reflect growing concern that the conflict could drag on and continue to disrupt oil flows through key shipping routes in West Asia.
Shipping attacks raise supply concerns
Tensions escalated after the United States and Yemen’s Iran-aligned Houthi movement reported separate attacks on commercial shipping in the Strait of Hormuz and the Bab el-Mandeb Strait.
The incidents have heightened concerns over the safety of shipping through two major maritime chokepoints and their potential impact on global energy supplies.
More from BusinessIranian security official Mohsen Rezaei that the Strait of Hormuz would remain closed unless Washington accepted Tehran’s conditions for ending the conflict. These include the release of frozen Iranian assets and an end to other regional conflicts.
The Strait of Hormuz is a vital route for global energy trade, linking the Persian Gulf with the Gulf of Oman.
Shipping data showed traffic through the strait fell to just six vessels on Monday, compared with a 10-day average of about 11. Before the war, daily traffic stood at roughly 125 to 140 vessels.
The sharp decline underscores the extent of disruption to commercial shipping in the region, even as diplomatic efforts continue.
In a separate incident, a Houthi attack on the Egyptian-owned cargo ship Tihamah in the Bab el-Mandeb Strait killed four crew members and two Yemeni rescuers, according to Reuters. The attack marked the first reported fatalities from Houthi strikes on shipping since the Iran war began.
US crude inventories jump sharply
Geopolitical tensions supported oil prices, but the market also received a bearish signal from the United States.
Industry sources citing American Petroleum Institute (API) data said US crude inventories rose by about 9.1 million barrels in the week ended August 7. Gasoline stocks fell by 1.5 million barrels, while distillate inventories declined by 596,000 barrels.
The crude build was significantly larger than expected. A Reuters poll had indicated that US crude and fuel inventories were expected to decline last week.
If confirmed by official data, the sharp rise in crude stocks could ease near-term concerns about tightness in the oil market.
Official figures from the US Energy Information Administration (EIA), the statistical arm of the US Department of Energy, are due later on Wednesday and could provide further direction to prices.
Hormuz remains key to oil outlook
Despite the inventory build, the geopolitical outlook remains central to the oil market.
The EIA said that some Middle Eastern oil production could remain offline through the end of 2027 because of disruptions linked to the conflict. It estimated that about 5.5 million barrels per day of oil production had been shut in during July, equivalent to more than 5 per cent of global oil consumption.
The agency expects shipping through the Strait of Hormuz to improve from September, but forecasts that about 600,000 barrels per day of regional oil production could remain offline through 2027.
For major oil importers such as India, prolonged disruption in the region could keep crude prices elevated and increase pressure on import costs, the rupee and domestic fuel prices.
Markets are now watching whether diplomatic efforts between Washington and Tehran can produce an agreement that restores stability to shipping through the Strait of Hormuz.
Until then, further attacks on vessels or setbacks in negotiations could keep a geopolitical risk premium embedded in global oil prices.
With inputs from agencies.
