West Texas Intermediate (WTI) oil prices rebounded sharply, trading around $98.60 per barrel during Asian hours on Wednesday, after suffering over 4% losses the previous day [1][2]. The recovery was driven by the United Arab Emirates (UAE) lobbying for a United Nations Security Council (UNSC) resolution to authorize a multinational military mission to restore navigation in the Strait of Hormuz, which has been disrupted amid ongoing regional tensions [1][2][3]. The UAE is also urging the United States and allied nations across Europe and Asia to form a coalition to clear mines, escort commercial vessels, and secure strategic positions along the waterway if necessary [1][2].
The oil price rebound provided support to the commodity-linked Canadian Dollar (CAD), which strengthened against the US Dollar (USD), with the USD/CAD pair hovering around 1.3910 and remaining subdued for the second consecutive trading day [1]. The CAD's rise is attributed to higher oil prices, given Canada’s status as the largest crude exporter to the US [1]. Meanwhile, the Japanese Yen (JPY) also saw gains, sitting near a one-week top as hopes for Middle East de-escalation undermined the USD's reserve currency status [3].
US President Donald Trump stated on Tuesday that the US would be "leaving very soon" from the Iran war, suggesting a withdrawal could occur within two to three weeks and emphasizing that a formal agreement with Tehran is not necessary to end hostilities [1][2][3]. Iranian President Masoud Pezeshkian signaled willingness to de-escalate tensions if specific guarantees are met [1][2]. These developments have improved global risk sentiment, weighing on the USD and supporting risk-sensitive currencies like CAD and JPY [1][3].
Despite the positive sentiment, uncertainty remains. Iran has historically maintained a firm stance, and the continued US military presence could heighten the risk of renewed escalation [2][3]. Additionally, a Reuters survey revealed OPEC oil output dropped sharply in March to its lowest level since June 2020, falling by 7.3 million barrels per day to 21.57 million barrels per day, largely due to supply disruptions linked to the Strait of Hormuz [2]. The American Petroleum Institute (API) reported a surge in Weekly Crude Oil Stock by 10.263 million barrels in the week ending March 27, marking the largest build in weeks [2].
Looking ahead, market participants are cautious as the Bank of Japan noted its tankan survey likely did not fully reflect the impact of the Middle East conflict, and Japan’s reliance on Middle Eastern oil imports continues to pose risks to its economy [3]. Traders are also awaiting key US macro data, including the ADP report and ISM Manufacturing PMI, for further market direction [3].
CONCLUSION
The UAE's push for UN-backed action in the Strait of Hormuz has triggered a rebound in oil prices, strengthening the Canadian Dollar and boosting global risk sentiment. However, persistent geopolitical uncertainties and supply disruptions continue to weigh on market outlooks, with traders closely monitoring upcoming US economic data and developments in the Middle East. The overall market impact is high, reflecting both optimism and caution amid ongoing tensions.