Oil prices jumped more than 6% on Wednesday, settling at their highest levels in weeks as stalled U.S.-Iran negotiations reinforced concerns over prolonged disruptions to Middle Eastern supply. Brent crude rose 6.1% to $118.03 per barrel—its eighth consecutive gain—while U.S. West Texas Intermediate (WTI) climbed 7% to $106.88. Brent briefly pushed toward $120 in post-settlement trading, a level not seen since mid-2022.
The rally was driven by growing expectations that supply constraints could persist. Signals from U.S. policymakers suggest the potential for an extended blockade of Iranian exports, raising the likelihood of sustained disruption across global energy markets.
Fundamentals added further support. U.S. inventory data showed a sharp draw in crude stocks, alongside larger-than-expected declines in gasoline and distillate inventories. The combined drawdown points to tightening supply conditions and strengthening demand, particularly as the market approaches peak summer consumption.
Logistical constraints remain a central issue. With the Strait of Hormuz still operating well below normal capacity, producers are increasingly seeking alternative export routes, underscoring the difficulty of moving crude to global markets despite available supply.
Seasonal demand trends are also beginning to amplify market tightness. As fuel consumption rises into the summer months, the combination of constrained supply and stronger product demand is expected to provide continued support for prices.
Meanwhile, markets are assessing the longer-term implications of the United Arab Emirates’ decision to exit OPEC. While the move introduces structural uncertainty around future supply coordination, its near-term impact is limited, as current pricing remains driven primarily by physical disruptions rather than production policy.