Brent crude rises over 1 percent amid Middle East tension
Oil prices rose on Wednesday as Middle East volatility persisted. Analysts warn that infrastructure damage will keep supplies tight even if the conflict ends.
Crude oil prices advanced by more than 1% on Wednesday as persistent geopolitical instability in the Middle East outweighed reports of a potential de-escalation in regional hostilities. The market remains on edge despite diplomatic signals suggesting the military conflict involving the United States and Iran may be nearing its end.
The June contract for Brent Crude Oil Futures climbed $1.40, or 1.4%, to $105.37 per barrel by 0430 GMT. This extension of gains follows a record-breaking March for Brent, which saw a monthly surge of 64%. Meanwhile, WTI Crude Oil Futures for May delivery rose by $1.59, or 1.6%, to $102.97 per barrel.
The price recovery follows a turbulent Tuesday where Brent futures dropped over $3 amid unconfirmed reports regarding a ceasefire. President Donald Trump later stated that the military campaign could conclude within two to three weeks, noting that a formal deal might not be required to end the month-long war. However, market experts suggest that even a cessation of fighting will not immediately resolve supply tightness due to significant infrastructure damage.
Priyanka Sachdeva, a senior market analyst at Phillip Nova, emphasized that the normalization of supply chains will be a gradual process.
Even if it starts to de-escalate, the flow of tankers wont resume right away ... shipping costs and insurance, tanker movement will take time to return to normal.
A major point of concern remains the Strait of Hormuz, a critical maritime route responsible for the passage of 20% of the world's oil and liquefied natural gas. While the United States administration has suggested the war could end before the strait is fully reopened, analysts from LSEG remain cautious about the immediate outlook for energy assets.
Even with diplomatic channels reportedly still active and intermittent comments from the U.S. administration predicting a short end to the conflict, the combination of limited tangible diplomatic progress, continued maritime attacks and explicit threats against energy assets keeps supply risks skewed to the upside.
The impact of the conflict is already evident in production data. A recent survey indicated that OPEC oil output plummeted by 7.3 million barrels per day in March, largely due to forced export cuts resulting from the closure of the strait. Furthermore, data from the Energy Information Administration revealed that crude production in the United States experienced its sharpest decline in two years this past January, driven by severe winter storms that disrupted operations across the country.
