Oil Rebounds as Middle East Tensions Flare

Crude oil surged more than 4% toward $83 per barrel on Wednesday, snapping a three-day losing streak as renewed hostilities in the Middle East reignited geopolitical tensions after several days of relative calm, fueling fresh concerns over disruptions to energy supplies. The US military said it had successfully intercepted what it described as a surprise Iranian attack targeting US troops stationed across the Middle East. Meanwhile, Iran-backed militias in Iraq launched drones at oil facilities in Saudi Arabia’s Eastern Region for a second consecutive day, although the full extent of the damage remains unclear. On the diplomatic front, Iran rejected Oman’s proposal for shared 50-50 control of the Strait of Hormuz, maintaining that Tehran must retain full control of the inbound shipping lane and part of the outbound route. In the US, API data showed crude oil inventories fell by 3.3 million barrels last week, pointing to continued tightness in global oil supplies.

Crude oil fell to around $79 per barrel on Tuesday, touching its lowest level in more than a week, as renewed diplomatic efforts over the Strait of Hormuz improved the outlook for Middle East oil supplies. Iran’s Foreign Minister Abbas Araghchi held separate talks with his Saudi and Omani counterparts, focusing on restoring security in the strategic waterway after disruptions caused by the US-Iran conflict. Oman has proposed a joint regional mechanism to manage the strait, allowing Iran to collect voluntary transit fees, a plan that has reportedly gained support from Gulf states. Also, President Donald Trump said Washington was holding “good talks” with Tehran, although he warned military strikes could resume if diplomacy fails, while Iran also threatened retaliation. Despite the diplomatic progress, regional risks remain elevated after Saudi Arabia intercepted drones targeting oil facilities and Yemen’s Houthi rebels claimed an attack on the kingdom’s East-West pipeline.

Crude oil fell to around $81 per barrel on Tuesday, touching its lowest level in more than a week, as optimism over a potential diplomatic breakthrough between the US and Iran eased concerns about supply disruptions. President Donald Trump said Washington was engaged in “good talks” with Tehran and that there was a “good chance” of reaching a resolution after pausing military strikes to give negotiations more time. He cautioned, however, that US attacks would resume if diplomacy failed, while Iran also warned it would retaliate should talks collapse. Oman has reportedly proposed a joint regional mechanism to manage shipping through the Strait of Hormuz, including a voluntary fee system. Despite the improving diplomatic outlook, geopolitical risks remain elevated. Saudi Arabia said it intercepted drones launched from Iraq targeting petroleum facilities, blaming Iran-backed groups, while Yemen’s Houthi rebels claimed responsibility for an attack on Saudi Arabia’s East-West oil pipeline.