Oil prices rallied sharply on Wednesday, with benchmark crude contracts gaining over 7%, after a fresh wave of military action in the Middle East reignited concerns over global oil supplies. The rally was also supported by industry data showing a drawdown in US crude inventories.
Geopolitical Triggers
The latest jump followed renewed strikes involving the United States, Saudi Arabia and Iran-backed groups. According to the source, the United States and Saudi Arabia carried out strikes on Iran-backed groups in Iraq on Wednesday, saying the groups were responsible for drone attacks on Saudi oil facilities. Earlier, the US military said it had prevented a surprise Iranian attack on American troops in the region. Iran, in turn, said it had targeted ships in the Strait of Hormuz and US bases in Jordan.
Markets found further support after US President Donald Trump said in an interview with Fox News that the United States would respond with retaliatory strikes against Iran. The developments also dealt a blow to diplomatic efforts around the Strait of Hormuz. A senior Iranian official told Reuters that Tehran had rejected Oman's proposal for regional joint management of the strategic waterway, dimming hopes of resolving a months-long impasse that has disrupted Gulf trade.
"Renewed military strikes in the Middle East and Iranian officials reiterating that they want to control shipping activity through the Strait of Hormuz amid depressed oil flows through the Strait are lifting oil prices again," UBS analyst Giovanni Staunovo told Reuters.
Supply Disruption: Strait of Hormuz & Bab el-Mandeb
The disruption has continued to affect shipping. Only a small number of commodity vessels have crossed the Strait of Hormuz this week. By comparison, traffic through the Bab el-Mandeb Strait increased, with five ships passing through on Wednesday and 39 on Tuesday, the highest daily count since July 19, before Yemen's Iran-backed Houthi militants announced a maritime blockade of Saudi Arabia.
According to regional sources cited by Reuters, the Houthis are also considering imposing charges on commercial vessels using the southern Red Sea. Six sources familiar with the matter also said China has held direct discussions with the group to ensure its oil tankers can transit the route without being attacked.
US Inventory Support
Apart from geopolitical tensions, traders also drew support from inventory data. Market sources, citing figures from the American Petroleum Institute, said US crude stockpiles declined by about 3.3 million barrels during the week ended July 24. Official figures from the Energy Information Administration are expected later on Wednesday.
Price Outlook
Analysts said oil prices are likely to remain volatile as the conflict continues to shift. Suvro Sarkar, head of energy research at DBS Bank, commented:
"We believe Brent oil prices will continue to whipsaw in the $80-$100 per barrel range in the near term as the conflict ebbs and flows in the Middle East. The situation has escalated since US President Donald Trump signalled a return to diplomacy earlier in the week. This series of stop-start negotiations means a complete removal of the Strait of Hormuz blockade is not achieved, and oil prices could see higher floor of around $80 per barrel even under a de-escalation scenario."
| Contract | Price (per barrel) | Change | % Change |
|---|---|---|---|
| Brent crude | $90.37 | +$6.28 | +7.47% |
| US WTI | $84.93 | +$5.67 | +7.15% |
For commodity traders and procurement teams, the immediate takeaway is a sharp upward repricing of geopolitical risk premium. The combination of active military strikes, disrupted Strait of Hormuz traffic, and falling US inventories points to sustained tightness in the near term. The $80 floor cited by DBS suggests that even if de-escalation occurs, prices are unlikely to retreat to pre-conflict levels quickly. All eyes will be on the EIA official data later Wednesday and any further diplomatic or military moves over the coming days.
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