Oil prices steadied on Wednesday, recovering from early losses to post moderate gains as markets balanced escalating Middle East tensions against potential supply disruptions. Brent crude rose 0.4% to $76.73/barrel while WTI gained 0.5% to $75.24, building on Tuesday’s 4% surge.
Key Market Drivers:
- Geopolitical Escalation:
- President Trump warned of thinning U.S. patience, demanding Iran’s “unconditional surrender” (rejected by Ayatollah Khamenei)
- Sources reveal Trump considering joint U.S.-Israel strikes on Iranian nuclear sites
- Iran threatened “firm response” if U.S. directly intervenes
- Supply Disruption Risks:
- ING analysts warn Strait of Hormuz closure could spike oil to $120/barrel (30% of seaborne oil transits here)
- Direct U.S. involvement heightens risks to regional energy infrastructure
- Conflicting Fed Pressures:
- Fed expected to hold rates (4.25%-4.50%) but Middle East turmoil could force earlier cuts
- Analyst Tony Sycamore (IG) sees possible 25bp July cut vs. September expectation
- Paradox: Conflict could both slow growth (requiring cuts) and spur oil-driven inflation (preventing cuts)
- Supply Data:
- API reported massive 10.1M barrel U.S. crude draw (week ending June 13)
- Official EIA data pending
Critical Context:
Iran’s position as OPEC’s third-largest producer (3.3M bpd) amplifies market sensitivity to conflict developments. While prices stabilized today, the 1% intraday swing reflects persistent volatility.
Oil Prices Stabilize Amid Escalation Fears as Iran-Israel Conflict Enters Sixth Day