West Texas Intermediate (WTI) crude oil prices experienced significant volatility following renewed US military action in Iran. According to fxstreet, WTI traded around $89.35 during early Asian hours on Thursday, recovering some lost ground after the US carried out fresh strikes in Iran targeting a military site that posed a threat to US forces and commercial shipping in the Strait of Hormuz [1]. Reuters reported that the US military also intercepted and shot down multiple Iranian drones [1]. CNBC notes that oil prices initially fell more than 5% on Wednesday after Secretary of State Marco Rubio stated that Washington was giving Iran talks 'every chance to succeed' and that negotiations had made some progress, but warned that President Donald Trump still had military options if diplomacy failed [2]. Shortly after, a US official confirmed new overnight strikes in Iran, which led to a rebound in oil prices and a lower open for Asia-Pacific markets on Thursday [2].
US President Donald Trump emphasized that he would not be rushed into a deal with Iran and warned that Iran's efforts to outlast him would not succeed, stating he does not 'care about the midterms' [1]. Trump also opposed Russia or China taking control of Iran's highly enriched uranium as part of any potential deal, adding complexity to ongoing negotiations [2].
On the supply side, the American Petroleum Institute (API) reported that US crude oil inventories declined by 2.8 million barrels for the week ending May 22, compared to a fall of 9.1 million barrels in the previous week [1]. The Energy Information Administration (EIA) report was expected later on Thursday, which traders were closely watching for further market direction [1].
The earlier decline in oil prices provided relief across energy markets and supported equities, with the Dow Jones Industrial Average rising about 200 points to a record close as oil retreated on optimism over a potential Iran truce [2]. However, the subsequent US strikes and renewed tensions reversed some of these gains in oil prices [1][2]. Investors are now focused on an upcoming April inflation reading, which could influence expectations for future Federal Reserve rate cuts [2]. Minneapolis Fed President Neel Kashkari reiterated that reducing inflation remains a top priority, noting that consumer prices are still 'much too high' [2].
CONCLUSION
US airstrikes in Iran have injected fresh volatility into oil markets, with WTI prices rebounding after an initial sharp decline on hopes for diplomatic progress. The situation remains fluid, with both geopolitical risks and upcoming economic data poised to influence market direction. Investors are closely monitoring further developments in US-Iran relations and key inflation readings for signals on future market moves.