Oil prices surged to their highest levels in three weeks on Wednesday, as persistent uncertainty over the safety of shipping through the Strait of Hormuz combined with wider supply disruptions to keep traders on edge and geopolitical risk firmly embedded in the market.
Brent crude futures rose 45 cents, or 0.49%, to $91.47 a barrel by 07:54 GMT, marking its strongest level since July 30. U.S. West Texas Intermediate crude climbed a matching 45 cents, or 0.53%, to $85.39 a barrel, its highest since July 31.
At the heart of the rally is the Strait of Hormuz, the narrow waterway that historically has carried around one-fifth of the world’s oil and liquefied natural gas supplies.
Since the U.S.-Israeli war on Iran erupted at the end of February, the strait has become the single largest source of anxiety for energy markets, and that anxiety shows little sign of easing.
“Confidence in safe passage remains low, with shipping volumes still running well below normal levels,” said Tim Waterer, chief market analyst at KCM. “That persistent uncertainty continues to keep a geopolitical risk premium embedded in the oil price.”
Fresh data released Wednesday confirmed that traffic through Hormuz has slowed further, with most shipowners choosing to steer clear of the waterway rather than risk their vessels amid the standoff.
The diplomatic picture only added to the confusion. U.S. President Donald Trump said Tuesday that no talks were underway with Iran and insisted the strait remained open, a claim directly contradicted by Tehran, which maintains the waterway is shut.
Compounding matters, a temporary ceasefire agreement lapsed on Monday, and a senior Iranian official told Reuters that Iran was shifting its posture amid the deepening diplomatic stalemate. Notably, neither side reported any strikes on Tuesday, leaving the market to parse a tense but so far non-violent impasse.
“Commercial shipping through Hormuz continues to face near full disruption while disagreements persist over the conditions governing maritime traffic,” said Ahmad Assiri, research strategist at brokerage Pepperstone.
For analysts, Brent’s push above $91 a barrel is a signal in itself. Assiri noted that the move suggests traders are pricing in an increasingly steep risk premium, with the possibility of crude climbing back into three-digit territory not being ruled out.
Against this backdrop of chokepoint risk, Iraq took steps this week to shore up its own crude flows. Baghdad’s cabinet approved a new mechanism Tuesday for exporting Iraqi crude through specialized international and local companies via multiple export outlets, according to a government statement.
The contracts under the new framework are set to run for three months starting September 1, a move that appears aimed at building in redundancy for exports should regional shipping routes face further strain.
Adding another layer to Wednesday’s trading, preliminary industry data pointed to tightening U.S. supply. Crude oil and distillate inventories fell last week while gasoline stocks rose, according to market sources citing figures from the American Petroleum Institute.
Traders are now awaiting the official tally from the U.S. Energy Information Administration, due at 10:30 a.m. ET (1430 GMT). Analysts are forecasting a draw of roughly 600,000 barrels in crude stocks for the week ended August 14, a figure that, if confirmed, would reinforce the narrative of a market being squeezed from both the supply and geopolitical sides at once.
With safe passage through Hormuz still very much in doubt and diplomatic channels apparently frozen, market watchers say the risk premium baked into oil prices is unlikely to unwind soon, leaving Brent’s climb toward, and potentially past, the $100 mark firmly in play.
WHAT YOU SHOULD KNOW
Oil prices hit a three-week high, driven by one dominant factor: persistent uncertainty over the Strait of Hormuz. With shipping through the waterway still severely disrupted, diplomatic talks stalled, and conflicting claims from the U.S. and Iran over its status, the market continues to price in a substantial geopolitical risk premium.
Until safe passage through this critical chokepoint which normally carries a fifth of global oil supply, is restored, oil prices are likely to stay elevated, with analysts warning a return to $100+ crude is a real possibility.
