Oil climbs 3% as US-Iran conflict disrupts supplies, with Strait of Hormuz traffic effectively closed.
Oil prices climbed sharply on Wednesday as escalating conflict involving the United States, Israel and Iran disrupted energy flows across the Middle East, pushing global benchmarks to multi-month highs.
Brent crude rose $2.67, or 3.3%, to $84.07 a barrel by 0659 GMT after closing at its highest level since January 2025.
US West Texas Intermediate (WTI) gained $2.24, or 3%, to $76.80, building on gains from the previous session. Both benchmarks have risen by roughly 5% or more over the past two trading days.
“The primary near-term driver for oil prices remains the US Iran conflict,” said Kelvin Wong, senior market analyst at OANDA. He noted that only clear signs of de escalation could ease the bullish momentum, adding that such signals are currently absent.
The price surge followed strikes by Israeli and US forces on Iranian targets on Tuesday, prompting retaliatory Iranian attacks on energy infrastructure in a region responsible for nearly one third of global oil production. The escalating hostilities have rattled markets already wary of supply risks.
Iraq, the second largest crude producer in OPEC, has reportedly cut output by nearly 1.5 million barrels per day about half of its production due to storage constraints and blocked export routes. Officials warned the country could be forced to shut in nearly 3 million barrels per day within days if exports fail to resume.
Tensions have also intensified in the Strait of Hormuz, a critical chokepoint through which around one fifth of the world’s oil and liquefied natural gas passes. Iran has targeted tankers in the area, and traffic through the strait remains effectively closed, deepening supply concerns.
US President Donald Trump suggested the US Navy could begin escorting oil tankers through the Strait of Hormuz if necessary. He also said he had directed the US International Development Finance Corporation to provide political risk insurance and financial guarantees to support maritime trade in the Gulf.
Analysts at ING described the move as welcome but cautioned that naval escorts would take time to implement and may not immediately calm markets. Wong added that mitigation efforts so far have not altered the prevailing bullish trend, noting that WTI continues to hold above key short term support levels between $73.40 and $70.70 per barrel.
Meanwhile, countries and companies are scrambling for alternatives. India and Indonesia have begun seeking other energy sources, while some Chinese refineries are shutting down or advancing maintenance schedules in response to supply uncertainty.
In the United States, crude inventories rose by 5.6 million barrels last week, according to market sources citing American Petroleum Institute data well above analysts’ expectations of a 2.3 million barrel increase. Official government data is due later Wednesday.
As investigations into regional disruptions continue and diplomatic efforts show little immediate progress, energy markets remain on edge, with traders closely watching developments in one of the world’s most strategically vital oil corridors.