Oil prices climb as Middle East shipping attacks stoke supply fears

Oil prices extended gains on Wednesday, driven by fresh attacks on vessels in critical Middle East shipping lanes and the apparent breakdown of diplomatic efforts between Washington and Tehran.

Brent crude futures were up 0.2% at $89.08 per barrel, marking a sixth consecutive session of gains. US West Texas Intermediate (WTI) also rose 0.2% to $83.40, heading for a fifth straight daily increase. Both benchmarks had climbed more than $1 earlier in the session before paring gains.

The market's upward momentum was tempered briefly by expectations of a large build in US crude stockpiles, but prices resumed their climb after a senior Iranian source indicated there were no active discussions with the United States to extend a ceasefire. From Tehran's perspective, the source said, the deal had no start date and therefore nothing to extend.

Attacks on key shipping routes

The United States and Yemen's Iran-aligned Houthis reported separate attacks on shipping in the Strait of Hormuz and the Bab el-Mandeb Strait on Tuesday. Both waterways are vital arteries for Middle Eastern oil and gas exports, alongside the Suez Canal.

Shipping data showed vessel transits through the Strait of Hormuz fell to a one-week low of eight on Tuesday, a sharp contrast to the 125 to 140 vessels that typically passed through the waterway daily before the conflict.

US inventory data in focus

Investors were also eyeing US crude inventory figures due later in the day. Market sources citing American Petroleum Institute data indicated crude stocks rose by about 9.1 million barrels last week, far exceeding expectations. Gasoline inventories fell by 1.5 million barrels, while distillate stocks dropped by 596,000 barrels.

If confirmed by the Energy Information Administration report, the crude build could ease concerns about supply tightness, according to Haitong Futures.

Other factors

In Libya, the National Oil Corporation said all fires at fuel storage tanks in the Zawiya oil complex were under control, helping to ease upward price pressure. For the longer term, the EIA expects significant disruptions to Middle East crude supplies to persist through the end of 2027, projecting Brent to average $86.81 a barrel in 2026 and WTI to average $80.88.