Oil Prices Advance as US–Iran Tensions Outweigh Bearish Inventory Data

Geopolitical Tensions Support Crude Benchmarks

On Wednesday, both major crude benchmarks advanced despite data indicating a large build in US crude oil stockpiles, a factor that would typically weigh on prices. Brent crude futures rose to $70.82 per barrel, while US benchmark West Texas Intermediate (WTI) crude gained to $65.87 per barrel, leaving both contracts up around 1% on the day.

The price gains came against a backdrop of escalating tensions between the United States and Iran. Investors are evaluating the potential impact of any conflict on oil supplies from the broader Middle East region. Concerns that hostilities could disrupt production or transport are currently exerting a stronger influence on price formation than the bearish inventory data.

Market Focus on Strait of Hormuz and Supply Risk

The market is particularly sensitive to any signals of disruption affecting the Strait of Hormuz, described as a critical chokepoint for global oil shipments. Fears that a heightened US–Iran conflict could compromise traffic through this route are contributing to a risk premium in crude prices.

Traders are balancing two opposing forces: the downside pressure from a significant increase in US crude stockpiles and the upside risk from potential supply interruptions. At present, geopolitical concerns are taking precedence, with the possibility of reduced or delayed Middle Eastern exports overshadowing signals of ample US supply. This dynamic is reinforcing volatility and keeping attention firmly on political developments rather than solely on inventory fundamentals.

FAQ

What happened to oil prices on Wednesday?
Oil prices rose about 1%, with Brent crude futures reaching $70.82 per barrel and WTI crude climbing to $65.87 per barrel.

Why did oil prices rise despite higher US crude inventories?
Prices increased because market participants focused on geopolitical risks linked to escalating US–Iran tensions, which overshadowed the typically bearish impact of a large build in US crude stockpiles.

Why is the Strait of Hormuz important for the oil market?
The Strait of Hormuz is a critical chokepoint for global oil shipments, and any disruption there could significantly affect the flow of crude from the Middle East, influencing global supply and prices.

What is currently driving oil price formation more: inventories or geopolitics?
According to current market behavior described, geopolitical concerns related to potential US–Iran conflict and associated supply risks are taking precedence over the bearish inventory data in shaping oil prices.