Oil Prices Climb as Middle East Conflict Threatens Supply and Strait of Hormuz Trade

BY COMFORT OGBONNA

Global oil prices rose on Wednesday as escalating conflict involving the United States, Israel, and Iran heightened concerns about disruptions to energy supplies across the Middle East. However, the pace of gains slowed compared with previous sessions after Donald Trump suggested that the U.S. Navy could escort oil tankers through the critical shipping route of the Strait of Hormuz.

Benchmark crude prices continued to rise in early trading. Brent crude climbed $1.17, or about 1.4%, to $82.57 a barrel by 0408 GMT after closing the previous day at its highest level since January 2025. Meanwhile, West Texas Intermediate crude gained 72 cents, or roughly 1%, to $75.28 a barrel after finishing Tuesday’s session at its highest price since June. Both major oil benchmarks have surged by about 5% or more over the past two trading sessions as investors reacted to the widening geopolitical risks.

Analysts say geopolitical tensions are now the dominant factor driving oil prices, overshadowing traditional market indicators such as inventory levels, economic data, or policy signals from oil-producing groups.

Priyanka Sachdeva, senior market analyst at Phillip Nova, said the ongoing conflict has temporarily pushed aside the usual market fundamentals. According to her, traders are now closely monitoring developments that could directly affect physical oil flows from the region.

She noted that key factors to watch in the coming days include export data from Gulf producers, any confirmed incidents involving oil tankers, movements by the U.S. Navy in the region, and signals from Iran regarding its next steps in the conflict.

Tensions intensified after Israeli and U.S. forces carried out strikes on targets across Iran on Tuesday. In response, Iran launched attacks on energy infrastructure within the region, increasing fears of a broader disruption to oil supply from the Middle East, which accounts for just under one-third of global crude production.

The situation has already begun affecting output and exports from neighboring countries. Officials in Iraq, the second-largest producer in OPEC, said the country has been forced to reduce crude production by nearly 1.5 million barrels per day—about half of its normal output. The cuts are largely due to storage limitations and the absence of a reliable export route amid the regional tensions.

Officials warned that if export channels are not restored soon, Iraq may be forced to shut down the rest of its roughly 3 million barrels per day of production within days, which could further tighten global oil supply.

The strategic Strait of Hormuz has also become a focal point of concern for energy markets. Iran has reportedly targeted tankers passing through the narrow waterway, which handles roughly one-fifth of the world’s oil and liquefied natural gas shipments. As a result, maritime traffic through the strait has been severely disrupted and remains effectively closed.

The Strait of Hormuz is widely considered one of the most important energy chokepoints in the world. Any prolonged disruption there could have significant consequences for global energy prices and supply chains.

President Trump said the U.S. Navy could begin escorting oil tankers through the strait if necessary to ensure the continued flow of energy supplies. He also stated that he had directed the U.S. International Development Finance Corporation to provide political risk insurance and financial guarantees aimed at supporting maritime trade in the Persian Gulf.

The announcement comes at a time when many insurers have begun cancelling war-risk coverage for vessels traveling through the Strait of Hormuz due to escalating hostilities.

Analysts at ING Group said the U.S. proposal to provide guarantees could help stabilize shipping activity in the region, but cautioned that such measures would not take effect immediately.

They noted that while naval escorts could eventually restore confidence among shipping companies and insurers, organizing and implementing such operations will require time and coordination.

In the meantime, countries and companies that rely heavily on Middle Eastern oil have begun exploring alternative supply routes and sources.

Governments in India and Indonesia have indicated they are searching for other energy suppliers to reduce dependence on Gulf shipments during the crisis. Meanwhile, some refineries in China have begun temporarily shutting down or accelerating maintenance schedules due to uncertainty surrounding crude deliveries.

Back in the United States, fresh inventory data added another layer of complexity to the oil market outlook. Industry figures from the American Petroleum Institute indicated that U.S. crude oil stockpiles rose by 5.6 million barrels last week. The increase was significantly larger than analysts’ expectations of a 2.3 million-barrel build.

Official government figures from the U.S. Energy Information Administration are expected later on Wednesday and will provide a clearer picture of the country’s supply and demand balance.

Despite the recent rise in inventories, energy markets remain primarily focused on the geopolitical risks emerging from the Middle East. As tensions continue to escalate, traders are bracing for further volatility in global oil prices, particularly if supply disruptions deepen or shipping routes remain constrained.