HOUSTON: Oil prices settled unchanged on Wednesday at the end of a volatile trading session, as escalating US and Israeli strikes against Iran widened regional tensions and paralysed shipping through the Strait of Hormuz for a fifth day, disrupting vital Middle East oil and gas flows.
Brent crude settled at US$81.40 per barrel, flat to Tuesday's close and at its highest since January 2025. US West Texas Intermediate crude settled 10 cents, or 0.1%, higher at US$74.66, closing at its highest since June for the second day in a row.
"Oil prices remain elevated as markets grapple with the prospect of a prolonged war and lingering supply disruptions," Nikos Tzabouras, Senior Market Analyst at Tradu.com said.
"The US has signalled a four- to five-week campaign, Iran is seeking to regionalise the conflict and the crucial Strait of Hormuz chokepoint is effectively shut. These developments could overturn previously unfavourable supply-demand dynamics, pushing crude higher and bringing the US$100 threshold into view," Tzabouras added.
The Brent benchmark had gained more than US$3 to touch US$84.48 in morning trading, within sight of multi-month highs, but traded lower after the New York Times reported operatives from Iran's Ministry of Intelligence signalled openness to the US Central Intelligence Agency to talks on ending the war, citing officials briefed on the matter.
On Wednesday, US Defence Secretary Pete Hegseth said the US was winning the war against Iran and that the US military could fight as long as needed. Israeli and US forces have struck targets across Iran, prompting Iranian retaliatory strikes against energy infrastructure in a region that accounts for just under a third of global oil production.
Iraq, the second-largest crude producer in the Organization of the Petroleum Exporting Countries, has cut output by nearly 1.5 million barrels a day due to storage limits and the lack of an export route, officials told Reuters. They said the country may have to shut nearly 3 million bpd of output within days if exports do not resume.
Traffic through the Strait also remains effectively closed. US President Donald Trump on Tuesday said the US Navy could begin escorting oil tankers through the Strait if necessary, adding that he had ordered the US International Development Finance Corporation to provide political risk insurance and financial guarantees for maritime trade in the Gulf.
The Pentagon and the US Energy Department are working on plans to secure the Strait of Hormuz to ensure safety for oil tankers amid the war on Iran, White House spokeswoman Karoline Leavitt said on Wednesday, adding that Trump and his advisers were also discussing what role the US could have in Iran after the military campaign.
Countries and companies have, meanwhile, begun seeking alternative routes and supplies of crude. India and Indonesia said they were looking for other supplies, while some Chinese refineries were shutting or moving up maintenance plans.
In the US, crude stocks rose by 3.5 million barrels in the last week to their highest in three and a half years, the Energy Information Administration said, compared with analysts' expectations in a Reuters poll for a 2.3 million-barrel rise.
US gasoline stocks fell by 1.7 million barrels, while distillate stockpiles, which include diesel and heating oil, rose by 429,000 barrels in the week.
"Global supplies remain ample with near record levels of "on the water” tanker storage. Still, until that oil can find a safe home, look for price volatility to continue," said Dennis Kissler, senior vice president of trading at BOK Financial.— Reuters
