Oil prices continued their upward trend for a third day, with global benchmark Brent crude advancing towards $86 a barrel. This surge follows an 11% increase in the previous two sessions. The price rise is attributed to President Donald Trump's threats of continued strikes on Iran, including potential targets like power plants and bridges, should Tehran not engage in negotiations. This comes hours after the US reimposed its blockade on Iranian shipping through the Strait of Hormuz.
The broader context for this market movement involves escalating tensions in the Middle East, particularly the renewed conflict between the US and Iran. Attacks on crude-laden vessels and Gulf nations have revived concerns about oil supplies from the region. The Strait of Hormuz is a critical chokepoint for global oil transit, and disruptions there significantly impact prices. Despite the recent gains, which recoup part of a 30% decline in the second quarter, analysts are cautiously monitoring the situation. West Texas Intermediate (WTI) also rose by 0.3% to settle at $79.60 a barrel, its highest in a month, after a nearly 11% jump in the preceding two sessions.
Adding to market complexities, US oil inventory data released on Wednesday by the Energy Information Administration indicated a substantial increase in distillate stockpiles due to weakened demand. Conversely, overall oil exports rose but remained below the pre-war average of approximately 4 million barrels a day. These inventory figures will be closely watched by traders as US and Iranian tensions amplify the demand for US crude to compensate for disruptions in Middle Eastern flows.
The re-establishment of the naval blockade on Iran's shipping through the Strait of Hormuz also plays a significant role. President Trump is reportedly demanding a 20% reimbursement on cargo, which could amount to about $30 million for fully loaded supertankers. This move aims to curb Iran's oil exports, which had seen a brief surge of at least 57 million barrels during a lull between previous blockades, underscoring the high stakes for the global oil market.
While oil has found some stability after rallying from around $70, the ongoing geopolitical deterioration and the threat of attacks in the Strait of Hormuz continue to support crude prices, keeping potential buyers ready to act if prices approach the $90 mark. The International Maritime Organization has issued a warning, deeming it too dangerous to cross the Strait of Hormuz currently. Iran, however, shows no sign of backing down, with the Islamic Revolutionary Guard Corps stating the strait will remain closed until US strikes and the blockade of Iranian ports cease.
