Oil prices rise further as Iran-Israel conflict enters 6th day

Oil prices continued their upward trend in early trading on Wednesday, building on a more than 4% surge in the previous session amid growing concerns that the Iran-Israel conflict could disrupt global oil supply.

By 0029 GMT, Brent crude futures had edged up 19 cents (0.25%) to $76.64 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 23 cents (0.31%) to trade at $75.07 per barrel.

Tensions escalated further as U.S. President Donald Trump on Tuesday demanded Iran’s “unconditional surrender,” with the regional air conflict between Iran and Israel entering its sixth day. In response, the U.S. military is deploying additional fighter aircraft to the region, according to three officials.

Analysts highlighted fears of potential supply disruptions through the Strait of Hormuz—a critical chokepoint that handles about 20% of the world’s seaborne oil. Concerns deepened following the collision and subsequent fire of two oil tankers near the strait on Tuesday. On Monday, the UK Maritime Trade Operations had also warned of electronic interference affecting ship navigation systems in the area.

Iran, OPEC’s third-largest oil producer, currently pumps around 3.3 million barrels per day. While a drop in Iranian output is possible, analysts believe other OPEC members may tap into their spare capacity to offset the shortfall.

Investors are also closely watching the U.S. Federal Reserve’s policy meeting, which continues on Wednesday. The central bank is widely expected to hold its benchmark interest rate steady at 4.25%-4.50%. However, the escalating Middle East conflict and slowing global growth could prompt the Fed to consider an earlier rate cut—possibly as soon as July—according to Tony Sycamore, market analyst at IG.

“The situation in the Middle East may encourage the Fed to adopt a more dovish stance, similar to its response after the October 7, 2023, Hamas attack,” Sycamore noted.

While lower interest rates typically support economic growth and increase oil demand, the ongoing conflict presents a dilemma for the Fed by potentially fueling inflation through rising oil prices.

Meanwhile, data from the American Petroleum Institute on Tuesday indicated that U.S. crude and gasoline inventories declined last week, while distillate stocks rose.