Oil trades near five-week high as US-Iran conflict escalates

Oil traded near the highest closing level in five weeks as hostilities broke out again between the US and Iran, renewing the threat to energy exports from the Middle East.

Brent futures were steady below $95 a barrel after surging 4.6% on Tuesday, while West Texas Intermediate traded near $90. The US conducted a second day of strikes on the Islamic Republic, with President Donald Trump threatening more attacks if Tehran responded. Within hours, Iran retaliated against Jordan, Bahrain and Kuwait, countries that host American forces.

The US struck two Iranian government vessels as part of the campaign, Axios reported, citing American officials. One of the people said it was part of a new “tanker-for-tanker” policy approved by Trump to deter Iran from attacking ships transiting Hormuz, according to the report.

“The conflict seems stuck in a phase where the tussles for control of Hormuz bring recurring hostilities, which nourishes the risk premium embedded in oil prices,” said Norbert Ruecker, head of economics at Julius Baer Group.

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The renewed fighting follows weeks of relative calm, during which the US said it was pivoting from military action to economic pressure on Tehran. Crude prices eked out a marginal gain last month, but remain about 30% higher since the war began in late February. Refined products such as diesel have rallied even harder due to the Middle East conflict and war between Russia and Ukraine.

Iran’s bankruptcy is in the “acceleration phase,” US Treasury Secretary Scott Bessent said at a press conference after a Group of 20 meeting in Asheville, North Carolina. He said 17 million barrels of crude exited Hormuz on Monday, stating that the Islamic Republic doesn’t have control of the strait.

US Energy Secretary Chris Wright reiterated the figure for Monday flows through Hormuz, adding that exports are averaging about 8 million barrels a day. A further 4 million to 5 million barrels each day are bypassing the waterway via pipelines, he told reporters while en route to Venezuela.

Prices:

Brent for November settlement added 0.2% to $94.80 a barrel at 9:12 a.m. in London.

Futures settled on Tuesday at $94.65, the highest since July 24.

WTI for October delivery edged down to $90.08 a barrel after advancing 5.2% in the previous session, the biggest gain in five weeks.

Prior to the Iran war, about a fifth of the world’s oil and liquefied natural gas was shipped through Hormuz to global markets. Some crude is being exported from the Persian Gulf, often on tankers that have switched their transponders off to avoid detection, but threats to shipping remain elevated.

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Late Tuesday, Trump said on social media that he “couldn’t care less” if Iran signed a deal, adding that the country’s economy was “totally collapsing.” Prior to the post, the Islamic Revolutionary Guard Corps said renewed fighting had “only tightened the lock” on Hormuz, IRIB reported.

Separately, the industry funded American Petroleum Institute reported US crude inventories inventories fell by 2.6 million barrels last week, according to a document seen by Bloomberg. If confirmed by official data later Wednesday, that would be the first decline in five weeks.

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