Oil Turns Lower Despite Mideast Escalation

Crude oil fell to around $88 per barrel on Wednesday, reversing gains from earlier in the session even as escalating tensions in the Middle East threatened to undermine peace negotiations. Iran launched attacks against several Gulf nations, including Bahrain, Jordan, and Kuwait, after the US carried out “self-defense strikes” in response to the downing of an American helicopter. Oil prices also faced pressure ahead of a key US inflation report that could reinforce the case for a Federal Reserve interest rate hike later this year. Higher borrowing costs are expected to eventually curb economic activity, clouding the outlook for global growth and energy demand. Meanwhile, industry data from the API showed US crude inventories dropped by 9.1 million barrels last week to their lowest level in four months, as buyers sought to replace supplies disrupted by the turmoil in the Persian Gulf.

Crude oil climbed toward $89 per barrel on Wednesday, recovering part of the previous session’s losses after the US launched new strikes against Iran following the downing of an American helicopter, raising concerns over the durability of a fragile ceasefire and the outlook for a longer-term peace agreement. The US military said President Donald Trump ordered the “self-defense strikes” in response to an Apache helicopter being shot down. Iranian Foreign Minister Abbas Araghchi responded that Iran’s armed forces would not leave any attack or threat unanswered. Oil prices had tumbled as much as 5.9% on Tuesday after Israel and Iran agreed to suspend hostilities following a renewed flare-up in the conflict. Meanwhile, industry data from the API showed US crude inventories fell by 9.1 million barrels last week to their lowest level in four months, as buyers sought to replace supplies disrupted by the turmoil in the Persian Gulf.

Crude oil fell around 3% to below $86 per barrel on Tuesday, the lowest since April 17, after Israel and Iran agreed to halt attacks following a renewed escalation in hostilities. Israeli Prime Minister Benjamin Netanyahu said Israel would pause strikes but warned it would respond to any further attacks from Tehran, while Iranian media reported a similar position. President Donald Trump said this week that negotiations were entering the final stage and that a clearer outcome could emerge within days. Meanwhile, China’s crude imports dropped to around 7.8 million barrels per day last month, the lowest level in more than eight years and nearly 4 million barrels per day below the 2025 average. Weaker demand from the world’s largest oil importer, combined with record US exports and emergency reserve releases, has helped limit the price impact of the conflict. Oil remains above prewar levels but well below recent highs.