West Texas Intermediate (WTI) oil prices have surged approximately 7% over the past two days, climbing above $84.00 per barrel on Thursday from lows of $77.16 earlier in the week [1]. This sharp increase follows the US military's announcement of renewed strikes on Iran on Wednesday, ending a three-day truce and dashing investor hopes for a negotiated resolution that had previously led to a $12 drop in oil prices [1]. The escalation in Middle East hostilities, including Iran's missile attack on a US military base in Jordan and a coordinated US-Saudi strike on Iran-backed militias in Iraq, has heightened concerns about the conflict spilling over in the region and added a risk premium to crude prices [1].
The market is also reacting to a significant decline in US oil inventories. According to data from the US Energy Information Administration (EIA) released on Wednesday, US commercial oil inventories fell by 7.167 million barrels in the week ending July 24, far exceeding the market's expected draw of 2.5 million barrels and offsetting the previous week's 2.01 million barrel build [1]. This unexpected depletion of reserves has intensified fears of a potential oil shortage, further supporting the upward movement in prices [1].
Strategists at TD Securities note that the resumption of Iranian-US strikes, combined with ongoing Houthi threats to Saudi energy infrastructure, are severely constraining flows through both the Strait of Hormuz and Bab el-Mandeb [1]. They argue that the market has largely abandoned hopes for renewed peace, given Iran's determination to control the Strait, and anticipate that continued disruptions will lead to reduced flows and a tightening global energy market, supporting further upside in crude oil prices [1].
CONCLUSION
WTI oil prices have rallied sharply due to renewed US-Iran hostilities and a larger-than-expected drawdown in US oil inventories, fueling concerns about supply shortages. Market strategists see ongoing geopolitical risks and constrained shipping routes as supportive of further price increases. The market impact is high, with sentiment turning positive for crude prices amid tightening supply conditions.