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US Oil Update: Futures Advance as Trump Pledges 'Economic D-Day' Against Iran

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Crude futures climbed in midday trading on Thursday, as President Trump threatened to intensify economic pressure on Iran, adding to concerns that the prolonged conflict will further disrupt crude supplies and shipping through the Persian Gulf.

Front-month West Texas Intermediate crude futures advanced by 2.3% to $87.80 per barrel, while Brent futures gained 1.9% to $93.35/bbl.

Gelber & Associates said that WTI is trading near $86.21/bbl, up about 2.1%, as continued disruption in the Strait of Hormuz keeps supply risk at the center of the market.

US commercial crude oil inventories increased by 4.4 million barrels to 428.8 mmbbls in the week ended Aug. 14, the Energy Information Administration said in its weekly report on Wednesday.

Crude inventories are matching the five-year average for this time of year, the EIA said. The build exceeds Macquarie's estimate of a 3.9-mmbbl rise for the week ended Aug. 14.

ING strategists said that the EIA's latest weekly inventory report showed US commercial crude oil inventories increased by 4.4 million barrels to 428.8 mmbbls, marking a third straight weekly build and the highest level since May.

Trump said on Wednesday that the US will launch what he called the "most crushing economic operation ever taken against any country" against Iran, threatening severe financial penalties on any nation that helps Tehran evade sanctions.

The US president said any country whose financial institutions, businesses, airports, or government entities offer Iran a "lifeline" will face what he described as tremendous economic consequences of their own.

He said oil smuggling, currency swap lines, cash transfers, exchange houses, ship registries and front companies were channels he wants shut down immediately, emphasizing that Iran will never be permitted to acquire a nuclear weapon.

However, Iran pushed back against Trump's claim that the country is on the brink of economic collapse, with Iranian Foreign Minister Abbas Araqchi calling the US President's comments an attempt to divert American public opinion from domestic problems, including record debt and rising interest rates.

The announcement by Trump comes after the UAE said Wednesday it was halting all trade and financial transactions with Iran after the Gulf state accused Tehran of firing ballistic missiles at its territory, ramping up regional tensions.

RBC Capital Markets strategists said that crude prices have been whipsawed by both sentiment around the Iran conflict and the reality on the water, but paper markets have best reflected the sentiment of those actively trading the market rather than overall market sentiment.

Meanwhile, Yemen's Houthis said on Thursday that they carried out two drone attacks on Saudi Arabia, targeting a sensitive target at Najran airport and an Aramco facility in Najran.

Further risks to energy supplies continue to mount, with UK Maritime Trade Operations saying a tanker was hijacked 136 nautical miles east of Mukalla, Yemen, by six armed persons who took control of the vessel and are redirecting it toward Somalia.

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