Oil climbs on US-Iran deal uncertainty and Middle East shipping attacks

Oil prices climbed on Wednesday morning as traders weighed two competing forces: the rising threat of Middle East supply disruptions against a surprising buildup of crude inventories in the United States. Brent crude futures gained 75 cents to settle at $89.66 a barrel, a gain of 0.84 percent, while West Texas Intermediate crude rose 72 cents to $83.92, up 0.87 percent. Both benchmarks had moved more than a dollar higher earlier in the session, continuing a rally that began the previous day when both contracts posted their strongest closes since July 31.

The price movement reflected a market caught between hope and fear. On Monday, oil had jumped roughly 5 percent after President Trump introduced a new condition to any peace agreement with Iran: compensation for Americans killed in wars, attacks, and protests. That demand appeared to dim prospects for a deal that had been under negotiation, and traders responded by pushing prices higher on supply concerns. By Tuesday, the United States and Yemen's Iran-aligned Houthis reported separate attacks on cargo vessels in two critical shipping lanes—the Strait of Hormuz and the Bab el-Mandeb Strait. Iran's top security official, Mohsen Rezaei, then declared that the Strait of Hormuz would remain closed unless the United States met Iran's conditions, which included releasing frozen Iranian assets and ending other regional conflicts. Meanwhile, Trump told an interviewer that the administration might either allow Iran to "bop along" or "hit them really, really hard," a statement that captured the administration's oscillating stance between negotiation and escalation.

The shipping data underscored the real-world impact of this uncertainty. On Tuesday, only eight vessels transited the Strait of Hormuz, marking a one-week low. Before the conflict, between 125 and 140 ships passed through that vital waterway daily. Priyanka Sachdeva, head of market insights at Phillip Nova in Singapore, described the dynamic as a seesaw. "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," she said. For some market participants, the volatility itself had become the opportunity. Sachdeva suggested that traders and speculators were adapting to what might become a pattern of weekly narrative shifts, creating what she called "a highly volatile but opportunity-rich landscape for intraday traders, scalpers and short-term speculators."

Yet the price gains faced a headwind from the supply side. A Reuters poll conducted on Tuesday had predicted that U.S. crude and fuel inventories would fall in the previous week. Instead, market sources citing American Petroleum Institute data reported that crude inventories had risen sharply in the week ended August 7. According to those sources, crude stocks climbed by approximately 9.1 million barrels, while gasoline inventories fell by 1.5 million barrels and distillate stocks declined by 596,000 barrels. The crude build was substantially larger than market expectations. Haitong Futures noted that if the American Petroleum Institute figures were confirmed by the Energy Information Administration's official report—scheduled for release at 10:30 a.m. Eastern time on Wednesday—the data could ease concerns about supply tightness in the market.

Looking ahead, the Energy Information Administration projected that Middle East crude oil supply disruptions would persist at roughly 600,000 barrels per day through the end of 2027. That forecast suggested the current volatility was unlikely to resolve quickly. The market would continue to absorb weekly shifts in the political narrative, each one capable of moving prices by a dollar or more, while underneath those swings lay a structural supply problem that officials expected to last for more than a year.