Crude oil futures surged during morning trading on Wednesday, with October Brent oil futures on ICE rising 3.50% to $84.95 per barrel and September WTI futures on NYMEX gaining 3.86% to $82.32 per barrel, according to The Hindu BusinessLine. On India's Multi Commodity Exchange (MCX), August crude futures climbed 4.14% to ₹7,918 per barrel, while September futures rose 3.68% to ₹7,723. The rally followed a heavy three-day sell-off.
Geopolitical Driver
The price spike was triggered by joint precision strikes conducted by the US Central Command and the Saudi Arabian Armed Forces in Iraq on July 28, as reported by The Hindu BusinessLine. The strikes targeted Iran-aligned terrorists that the Islamic Revolutionary Guard Corps (IRGC) directed to attack US forces and Saudi energy infrastructure. US and Saudi fighter aircraft struck multiple terrorist logistics and weapons sites across eastern Iraq in response to over 30 IRGC-directed aerial drone attacks in the prior 72 hours. The US Central Command stated that the unwarranted attacks against US forces were not successful.
Supply Disruption Threats
According to Warren Patterson, Head of Commodities Strategy at ING Think, and Ewa Manthey, Commodities Strategist, the renewed strength comes after the US intercepted a surprise attack on US troops and Saudi Arabia intercepted drones from Iranian-backed groups targeting Saudi energy infrastructure. These developments "throw cold water on the idea of a swift de-escalation in the Persian Gulf," they said. With Saudi oil infrastructure increasingly targeted, the risk of more prolonged supply disruptions grows. There are reports that the 400,000 barrels per day Jazan refinery in Saudi Arabia has shut following Houthi attacks over the weekend. If confirmed, this will only add to tightness concerns in the refined products market already dealing with disruptions from the Persian Gulf and Russia.
Meanwhile, tanker traffic through the Strait of Hormuz remains essentially halted. While Iran and Oman have held talks on managing vessel transits, Iran has rejected Oman’s proposal for a 50-50 shipping plan, insisting on oversight of both inbound and outbound vessels.
Price Comparison Across Contracts
| Contract | Price | Change from Previous Close |
|---|---|---|
| October Brent (ICE) | $84.95/barrel | +3.50% |
| September WTI (NYMEX) | $82.32/barrel | +3.86% |
| August MCX Crude | ₹7,918/barrel | +4.14% |
| September MCX Crude | ₹7,723/barrel | +3.68% |
Other Commodities
In related energy markets, August natural gas futures on MCX traded at ₹259.50, down 0.57% from the previous close of ₹261. On the National Commodities and Derivatives Exchange (NCDEX), August turmeric (farmer polished) contracts rose 0.73% to ₹20,504, while August Mumbai rainfall futures fell 1.10% to ₹2,433.
Market Response and Outlook
ING Think analysts noted that prices popped higher in early morning trading after a heavy sell-off over the last three days. The joint US-Saudi strikes and ongoing threats to Saudi infrastructure, including the potential Jazan refinery shutdown, are likely to keep supply concerns front and center. With the Strait of Hormuz effectively closed to tanker traffic and Iran rejecting diplomatic solutions, the risk premium in crude oil is expected to persist. Traders will monitor further developments in the Persian Gulf and any confirmation of refinery outages that could tighten refined product markets already strained by disruptions from Russia.
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