US Oil Update: Futures Surge as US-Iran Standoff Rattles Markets

-- Crude oil futures soared in midday trading on Wednesday, extending gains from the previous session, as the standoff between the US and Iran raised concerns over further supply disruptions in the Middle East.

Front-month West Texas Intermediate crude futures jumped 7.05% to $107.02 per barrel, while Brent futures surged 7.33% to $119.41/bbl.

US crude stockpiles dropped by 6.2 million barrels to 459.5 mmbbls in the week ended April 24, the Energy Information Administration said in its weekly report on Wednesday, amid signs of tightening supplies.

Crude inventories are now about 1% above the five-year average for this time of year, the EIA said.

Saxo Bank strategists said crude surged to record highs during this war-driven cycle, as the near-closure of the Strait of Hormuz prolongs a disruption that is tightening global energy markets.

President Trump is reportedly considering extending the US naval blockade of Iranian ports as it carries less of a risk for Washington than resuming hostilities or walking away from the Middle East conflict, which has roiled global energy markets.

Trump threatened Iran on Wednesday, saying the country "better get smart soon". "Iran can't get their act together. They don't know how to sign a non-nuclear deal. They better get smart soon!" Trump said in a post on Truth Social.

Soojin Kim, research analyst at MUFG, said that although Trump said Iran had asked for the blockade to be lifted during negotiations, reports suggest the US is preparing for a prolonged blockade of Iranian ports.

On the supply front, the US President has asked US energy firms about ways to mitigate the impact of a potentially months-long blockade of Iranian ports, raising concerns that disruptions to Middle Eastern supplies could be prolonged.

The US naval blockade appears to be putting pressure on Iran, amid reports that the country is running out of crude storage space, which could accelerate production cuts.

US Treasury Secretary Scott Bessent said Iran's Kharg Island, the country's primary oil export terminal, is approaching storage capacity, which will likely force the government to reduce crude production and cause damage to Iran's oil infrastructure.

"Iran is also facing growing storage constraints that could force deeper production cuts, while the US continues tightening sanctions on Chinese refiners linked to Iranian oil," Kim said.

Meanwhile, market participants continue to assess the impact of the shock decision to leave OPEC next month. ING strategists said that the departure during a period of significant supply disruption limits the market impact.

"Therefore, in the short term, this development has little impact on the market. But in the medium to longer term, it means more supply for the market," the analysts said.

Fed Chair Powell Says He Will Remain as Governor for Period of Time After Chair Term Ends

Federal Reserve Chair Jerome Powell said Wednesday at a press conference that he will remain on the Federal Reserve board for a period of time after his term as chair ends on May 15, noting the recent attacks on the Fed and saying that "the things that have happened really in the last three months I think left me no choice but to stay until I see them through at least that long."An investigation into Powell's actions as chair during the remodeling of headquarters at the Fed was halted by the Department of Justice, but it could be reopened if the Fed's inspector general finds wrongdoing, providing uncertainty."I have said that I will not leave the board until this investigation is well and truly over with transparency and finality and I stand by that," Powell said. "I am encouraged by recent developments, and I am watching the remaining steps in this process carefully."Powell said that his decision to remain on board has nothing to do with political comments, but rather his concern about the recent attack on the Fed by the Trump administration."After my term as chair ends on May 15, I will continue to serve as governor for a period of time to be determined," Powell said. "I plan to keep a low profile as a governor. There is only one chair of the Federal Reserve.""I will leave when I think it's appropriate to do so," he added.At the meeting, the Federal Open Market Committee decided to maintain its target rate at a range of 3.50% to 3.75%, but there were dissents in favor of both a lowering of the policy rate by one member and in favor of eliminating the bias toward easing in the statement by three members.

UAE Pushes for Greater Control Over Oil Output, Limited Near-Term Market Impact, RBC Says

The UAE's decision to leave OPEC is unlikely to disrupt oil markets in the near term, but points to a broader strategic realignment as the Gulf producer seeks greater control over its output policy amid the ongoing Middle East conflict, RBC Capital Markets strategists said in a note on Tuesday.The UAE has for years pushed to monetize investments in expanding crude capacity and promoting its Murban benchmark, a strategy that has at times strained relations within OPEC.RBC analysts said disputes over production baselines, including a July 2021 standoff that delayed an agreement for nearly two weeks, underscored friction between the UAE and other members over output quotas.The analysts said the UAE's departure reflects a continuation of these tensions, as the country has consistently sought higher production targets. A subsequent push in 2023 to revise its baseline led to a complex redistribution of quotas, reducing allocations for some African producers.However, despite the policy shift, the UAE is not expected to significantly increase production beyond levels seen in early 2026 once the conflict subsides.The Gulf state has been operating close to its current capacity, and post-war reconstruction demands are likely to temper any rapid supply increases.UAE authorities, in a statement, said it would continue to bring additional barrels to market "in a gradual and measured manner," aligned with demand and prevailing conditions.RBC analysts said this suggests spare capacity within the global system will remain concentrated in Saudi Arabia for the foreseeable future.The move comes at a critical moment in the regional conflict with Iran, which has heightened concerns over energy security, particularly around the strategically vital Strait of Hormuz.The UAE has been among the most vocal Gulf states opposing any scenario in which Iran maintains influence over the passage, citing repeated drone and missile attacks on its territory.The country's increasingly assertive stance appears to align more closely with Israel than with some Gulf neighbors.RBC analysts expect closer cooperation between Abu Dhabi and Israel on energy security and critical infrastructure once the conflict ends, potentially including joint investments and expanded defense agreements in strategic areas such as the Red Sea.The analyst said the UAE's exit does not signal an imminent fragmentation of OPEC. With no immediate requirement for coordinated production cuts and many member states focused on rebuilding capacity after the conflict, the group is expected to remain broadly intact in the near term.

US Oil Update: Futures Surge as US-Iran Standoff Rattles Markets

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