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US Oil Update: Futures Gain As Middle East Crisis Escalates

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Crude oil futures climbed in midday trading on Wednesday, extending gains for a fourth consecutive session, as escalating geopolitical tensions in the Middle East stoked concerns of a sustained disruption to global energy supplies amid a slowdown in Strait of Hormuz traffic.

Front-month West Texas Intermediate crude futures advanced by 2.1% to $86.70 per barrel, while Brent futures gained 1.5% to $92.35/bbl.

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 is above Macquarie's estimate of a 3.9-mmbbl draw for the week ended Aug. 14.

Saxo Bank strategists said President Trump declined to extend the US-Iran peace agreement, and shipping via the Hormuz slowed after attacks on tankers.

The UAE severed all economic ties with Iran on Wednesday after accusing Tehran of firing ballistic missiles at its territory, ramping up regional tensions.

The Gulf state, one of Iran's main trading partners, said it halted trade and financial transactions until further notice in light of "escalations that undermine regional and international peace and security."

Iranian Foreign Ministry spokesman Esmail Baghaei denied responsibility for the attack, saying the allegation undermines ongoing efforts to strengthen trust among regional countries and prevent further escalation of insecurity.

The incident comes as a 60-day ceasefire between the US and Iran expired, stoking concerns that tensions in the region could escalate.

Emmanuel Belostrino, head of global crude and geopolitical market data at Kpler, said that the 60-day window established by the Islamabad Memorandum of Understanding of 17 June lapsed on Aug. 17 with no peace agreement, no extension, and no active talks.

The latest data from Kpler show the truce cleared the conflict's stranded backlog in three weeks and moved about 374 million barrels of crude out of the Gulf, but it never reopened the Strait of Hormuz.

The 60-day window's shortfall relative to normal Hormuz flows is about 550 million barrels of crude, bridged so far by inventory draws and truce-window buffers that thin starting in September.

The latest escalation also came after President Trump insisted there were no talks ongoing with Iran to end the war that has upended energy markets.

"There are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran," Trump said in a social media post on Truth Social on Tuesday.

The global crude market remains focused on the Hormuz, with confirmed crossings through the strategic waterway plunging 17% from the previous day to 10, with six vessels exiting the Middle East Gulf and four entering, according to Kpler.

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