Oil prices steady as U.S., Israeli strikes on Iran snarl Hormuz shipping and force Iraq output cuts
Oil prices were steady after sharp swings Wednesday as U.S. and Israeli strikes against Iran escalated the conflict and left shipping through the Strait of Hormuz effectively shut for a fifth day, disrupting vital Middle East oil and gas production and trade.
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Brent crude fell 0.3% to $81.13 a barrel around 4 p.m. GMT, while West Texas Intermediate slipped 0.4% to $74.30. Both benchmarks had closed Tuesday at recent highs—Brent at its strongest since January 2025 and WTI at its highest since June—before whipsawing in volatile trading.
Brent jumped more than $3 in morning dealings to touch $84.48, near multi-year highs, but later eased after the New York Times reported that operatives from Iran’s Ministry of Intelligence had signaled openness to the U.S. Central Intelligence Agency for talks on ending the war, citing officials briefed on the matter.
“While flows through the Strait of Hormuz remain disrupted, market participants seem to expect a de-escalation of the conflict and a resumption of oil flows,” said Giovanni Staunovo, an analyst at UBS.
U.S. Defense Secretary Pete Hegseth said Wednesday the United States was winning the war against Iran and that U.S. forces could fight as long as needed. Israeli and U.S. strikes have hit targets across Iran, prompting Iranian retaliatory attacks on energy infrastructure in a region that accounts for just under a third of global oil production.
The supply shock is already rippling through OPEC members. Iraq, the group’s second-largest producer, has cut output by nearly 1.5 million barrels a day due to storage limits and the lack of an export route, officials told Reuters. They said the country may have to shut nearly 3 million barrels a day within days if exports do not resume. Traffic through the Strait remains effectively closed.
Amid the shipping paralysis, President Donald Trump said the U.S. Navy could begin escorting oil tankers through the Strait if necessary. He added that he had ordered the U.S. International Development Finance Corporation to provide political risk insurance and financial guarantees to support maritime trade in the Gulf.
Countries and companies are racing to secure alternative crude supplies and workarounds. India and Indonesia said they were seeking other sources of oil, while some Chinese refineries were shutting units or moving up maintenance to manage delays and shortfalls.
U.S. stockpiles provided a counterweight to geopolitical fears. Crude inventories rose by 3.5 million barrels last week to the highest level in three and a half years, the Energy Information Administration said. Analysts in a Reuters poll had expected a 2.3 million-barrel increase. Gasoline stocks fell by 1.7 million barrels, while distillates, including diesel and heating oil, rose by 429,000 barrels.
“Global supplies remain ample with near record levels of ‘on the water’ tanker storage. Still, until that oil can find a safe home, look for price volatility to continue,” said Dennis Kissler, senior vice president of trading at BOK Financial.
With conflict risk still high, market focus is trained on any signs of de-escalation or progress on tanker escorts that could reopen the chokepoint. Until then, traders say price action is likely to remain headline-driven, as disrupted Hormuz flows collide with still-solid inventories and emergency rerouting efforts across Asia.
By Abdiwahab Ahmed
Axadle Times international–Monitoring.
