Oil prices ended higher Wednesday in a choppy session, as traders weighed geopolitical tensions between Iran and Israel and the possibility of direct U.S. involvement in the conflict. Brent crude settled at $76.70 a barrel, up 25 cents, while U.S. West Texas Intermediate (WTI) rose 30 cents to finish at $75.14. Prices had fallen as much as 2% earlier in the day, following Tuesday’s sharp 4% rally.
The market was jittery as Iranian Supreme Leader Ayatollah Ali Khamenei rejected U.S. President Donald Trump’s call for unconditional surrender. Trump hinted at possible military action but gave no clear direction, stating only, “I may do it. I may not do it.” Reports suggested the U.S. was considering joining Israel in strikes on Iran’s nuclear facilities.
Analysts warned that direct U.S. involvement could escalate the conflict and put vital energy infrastructure at risk. ING highlighted the Strait of Hormuz—a critical passage for about one-third of global seaborne oil trade—as a potential flashpoint, saying its closure could push oil prices toward $120 a barrel.
Iran, which produces around 3.3 million barrels per day, has threatened to retaliate if the U.S. enters the conflict directly. Meanwhile, crude stocks in the U.S. dropped by a much larger-than-expected 11.5 million barrels last week, offering additional price support.
The U.S. Federal Reserve, while holding interest rates steady, maintained expectations for rate cuts later this year. Lower rates tend to stimulate economic activity, potentially increasing oil demand.