Oil Stabilizes After Three Days of Gains Amid Ongoing Hormuz Crisis

SadaNews - Oil stabilized after rising nearly 8% during the past three sessions, as the inability to reach a solution to the Middle East conflict continues, along with increasing pressures on Iranian exports due to a U.S. maritime blockade of the Strait of Hormuz.

West Texas Intermediate crude traded near $102 on Wednesday, while Brent crude was trading near $107.

No ocean-going tankers were spotted around the Iranian island of Kharg in recent days, according to satellite images, marking the first indication of an extended halt at the country's main export hub since the start of a war that has been ongoing for 10 weeks and has disrupted global markets.

Internal Pressures on Trump Increase

The Iran war is unlikely to take center stage in discussions between President Donald Trump and his Chinese counterpart Xi Jinping in Beijing this week, as the U.S. President told reporters at the White House on Tuesday, noting that trade talks will take precedence. He added, "We have Iran pretty much under control."

However, the war is likely to increase pressures on Trump domestically, after new U.S. data on Tuesday confirmed how the conflict is reigniting inflation. U.S. gasoline prices have jumped to their highest level since 2022, and this will be a key discussion point ahead of the crucial midterm elections in November.

The Strait of Hormuz has been effectively closed since hostilities began, with the U.S. imposing a blockade on Iranian ports in mid-April, complicating diplomatic efforts to end the conflict. Crude, natural gas, and fuel flows have been choked off, raising concerns about global growth.

Hormuz Disrupts Supplies and Pressures Markets

Analysts at Société Générale, including Ben Hov, wrote in a note that "the central risk for both policymakers and markets" lies in the timing mismatch between futures contracts and the actual market. They added, "Prices react immediately to headlines about reopening the strait, but the actual balance improves much later."

The conflict has thrown energy supply chains into disarray, particularly for Asian countries like Japan, which typically relies on the Middle East for about 90% of its crude needs. Refineries in the country are racing to find alternatives, including a recent purchase of Mexican oil, the first since 2023.

In another sign of increasing pressures, Vietnam's state oil company urged the United States to allow a giant tanker carrying crude to pass through its maritime blockade outside the Arabian Gulf, stating that the shipment is vital for its economy. The vessel had previously passed through Hormuz, but turned back on Monday near the maritime blockade.

After massive volumes earlier in the month, the number of contracts traded has steadily declined this week, with around 920,000 Brent contracts traded daily so far this week. The figure had reached up to 1.9 million contracts in the middle of last week.