Oil Prices Extend Gains to 7% as Geopolitical Tensions Trump Reserve Release Plans

Oil prices rose for a second consecutive day following another turbulent trading session, as heightened rhetoric surrounding the Iran conflict intensified fears of a protracted war, overshadowing an emergency crude reserve release by major economies.

West Texas Intermediate surged as much as 6.6% to $93.01 per barrel, building on a nearly 5% gain from the previous session. Iran communicated to regional mediators that any ceasefire agreement would necessitate a US guarantee against future strikes by either the United States or Israel. Washington is viewed as unlikely to accept these conditions, further dampening already fading hopes for a swift conclusion to the war.

Price gains moderated after the United States revealed plans to release 172 million barrels as part of a globally coordinated effort to ease prices. This release would represent nearly half of the nation's current strategic holdings.

Prices experienced a brief pullback on Wednesday following an agreement by the International Energy Agency to an unprecedented collective release of 400 million barrels, a volume significantly larger than the drawdown initiated after Russia's invasion of Ukraine in 2022.

Nevertheless, the critical Strait of Hormuz remains effectively closed to maritime traffic, and markets are monitoring closely for any indications of a return to normal trade flows. Suspected projectiles struck three vessels in the narrow waterway and the Persian Gulf on Wednesday, highlighting the persistent risks to shipping.

The effective closure of Hormuz, a chokepoint for approximately one-fifth of global oil shipments, has compelled major Gulf producers to reduce output, driving up prices for crude oil, natural gas, and refined products like diesel. Now in its second week, the conflict's repercussions have heightened concerns about a potential inflation crisis.

"With hostilities showing no signs of abating, production shut-ins increasing daily, and the strait effectively blocked, we maintain our view that Brent crude is poised to establish a new, higher trading range of $90 to $110 per barrel through next week," stated Robert Rennie, head of commodity research at Westpac Banking Corp.

Several nations have begun announcing details of their emergency reserve releases. Japan is preparing to offer 80 million barrels from its strategic stockpiles, the United Kingdom 13.5 million barrels, and South Korea 22.5 million barrels. Canada has requested that oil companies contribute from their reserves.

With global crude consumption slightly exceeding 100 million barrels per day, output cuts by Gulf producers have so far removed roughly 6% of supply from the market. The announced reserve releases have thus far had limited impact on prices as the conflict continues.

During a speech in Kentucky on Wednesday, President Donald Trump reiterated his belief that the war would conclude shortly, while also suggesting the US commitment would last as long as necessary to achieve its objectives. "We don't want to leave early, right?" he told the audience.