Strait of Hormuz to remain closed pending order from leader of the revolution, Iran says

The Strait of Hormuz has been closed by Tehran and will reopen only on the orders of the leader of the revolution, according to Iranian Armed Forces Deputy Chief of Staff Brigadier General Kioumars Heidari, Al Jazeera reported on Wednesday.

The critical waterway will "never return" to its status before the US-Israel war on Iran, according to Mohammad Bagher Ghalibaf, Iran's parliament speaker and top negotiator.

In the view of senior Iranian officials, US plans involve either additional military strikes or an increasingly tight economic stranglehold that will force Tehran to retaliate.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

In a separate development, a drone was intercepted and destroyed by the Saudi-led coalition over Saudi Arabia's oil-rich Eastern province as cross-border attacks intensified. The source added that debris fell following the destruction of two ballistic missiles targeting Mecca.

How is the market responding?

West Texas Intermediate (WTI) is trading at $85.25 at the time of writing, a decline of 0.10% for the day.

WTI Oil: Key Questions Answered

What defines WTI Oil?

Among the varieties of crude oil traded internationally, WTI, short for West Texas Intermediate, is one of three major types alongside Brent and Dubai Crude. Its relatively low gravity and sulphur content earn it the descriptions “light” and “sweet”, respectively. Regarded as a high-quality oil, it is easy to refine. Produced in the United States, WTI is distributed through the Cushing hub, known as “The Pipeline Crossroads of the World”. WTI serves as an oil-market benchmark, with its price regularly cited in the media.

What determines WTI Oil prices?

Supply and demand determine WTI Oil prices, as they do for other assets. Stronger global growth can lift demand, while weaker growth can have the reverse effect. On the supply side, political instability, wars and sanctions can cause disruptions that affect prices. Decisions by OPEC, a grouping of major oil-producing countries, are another important influence. WTI Crude Oil prices also respond to the value of the US Dollar because oil is traded mainly in US Dollars. A weaker US Dollar can therefore make oil more affordable, while a stronger currency can have the opposite effect.

Why do inventory figures affect WTI Oil prices?

WTI Oil prices respond to weekly oil inventory releases from the American Petroleum Institute (API) and the Energy Information Agency (EIA), as changes in stocks reflect shifts in supply and demand. A fall in inventories may signal stronger demand and push oil prices higher. By contrast, a build-up in stocks can point to increased supply and weigh on prices. The API publishes its report each Tuesday, followed by the EIA the next day. The two sets of results tend to be similar: 75% of the time, they are within 1% of each other. As the EIA is a government agency, its figures are regarded as more reliable.

Why do OPEC decisions matter for WTI Oil prices?

At meetings held twice a year, the 12 oil-producing nations that make up OPEC (Organization of the Petroleum Exporting Countries) jointly set production quotas for member countries. These decisions frequently influence WTI Oil prices. Lower quotas can restrict supply and lift oil prices, whereas an increase in OPEC production has the reverse effect. The broader OPEC+ grouping brings in ten additional non-OPEC members, with Russia the most notable among them.