Oil surged on Wednesday amid escalating friction between Iran and Israel, with Brent crude topping $76.60 and West Texas Intermediate reaching roughly $75.10 a barrel. Market momentum was powered by rising fears over supply chain vulnerabilities in the Middle East, even though core oil infrastructure remains largely intact and operational.
The escalation entered its sixth day as both nations exchanged strikes. President Trump has intensified U.S. military posturing by deploying additional fighter jets to the region and demanding Iran accept an “unconditional surrender,” reinforcing market concerns. Observers noted that U.S. involvement and strong rhetoric continue to fuel price volatility.
The Strait of Hormuz, a strategic chokepoint carrying nearly one-fifth of global seaborne oil, drew renewed attention after a collision between two tankers and reports of navigation disruptions from electronic interference. While Iran remains OPEC’s third-largest oil exporter, analysts say that other members may be able to compensate for any temporary shortfall, keeping net supply balanced.
In contrast, U.S. crude inventories fell sharply last week. Industry data from the American Petroleum Institute indicated a sizeable draw of over 10 million barrels—well above expectations—which has lent additional support to prices, especially during the summer driving season. This development comes amid softening economic indicators in the U.S., including weaker-than-expected retail sales and industrial output, which have prompted speculation that the Federal Reserve may opt for a rate cut in July to shield against economic drag.
Even though oil prices have rebounded strongly—rising over 4% on Tuesday and extending on Wednesday—the market lacks any confirmed infrastructure damage. Iran’s exports to its major trading partner, China, continue uninterrupted, and no deliberate obstruction of Gulf shipments has been observed. The absence of actual supply losses has kept a lid on prices falling into panic territory.
Still, industry experts remain on alert. Disruptions to tanker routes through the Strait of Hormuz, and the risk of broader regional fallout, pose considerable uncertainty. Insurance premiums for shipping in the area have spiked, and some operators have begun rerouting or cancelling voyages altogether.
Technical trends reveal that the price spread between Brent and WTI, now around $2.70, has widened compared to last year—a reflection of both logistical shifts and geopolitical risk factors. Analysts caution that sustained tension could sustain elevated spreads and higher energy costs globally.
Looking ahead, the trajectory of oil prices hinges on how the Iran‑Israel hostilities evolve, whether Iran attempts to block Gulf shipping, and how swiftly alternative supply sources can ramp up production. Simultaneously, macroeconomic variables—including U.S. monetary policy, global demand patterns, and seasonal consumption—will shape price trends through the summer.
