• Oil prices surge after renewed military tensions involving Iran in the Gulf region.
• Fears of prolonged disruptions to energy flows continue to support the market’s risk premium.
• A larger-than-expected drawdown in US Crude inventories adds further bullish momentum.

West Texas Intermediate (WTI) advances toward $94.00 at the time of writing, up 2.52% on the day, supported by a fresh escalation of geopolitical tensions in the Middle East and growing concerns about global Oil supplies.

Market sentiment deteriorated after the United States (US) Central Command (CENTCOM) reported that Iran had launched ballistic missiles toward Kuwait and Bahrain. According to US authorities, the missiles failed to reach their targets, but American forces responded with retaliatory strikes on Iran’s Qeshm Island. At the same time, Iran’s Foreign Ministry condemned the operation and warned that it reserves the right to respond against any country allowing the use of its territory or airspace for attacks against Iran.

The latest flare-up comes as negotiations between Washington and Tehran continue to send mixed signals. US President Donald Trump stated that talks remain ongoing and that Iran has agreed not to develop a nuclear weapon. However, Iranian media recently reported that communication between the two sides had been suspended for several days, increasing market skepticism about the prospects for a swift diplomatic breakthrough.

Traders fear that a prolonged conflict could further disrupt energy exports passing through the Persian Gulf, a region that plays a critical role in global energy markets. Several analysts believe that the lack of diplomatic progress could force the market to draw more heavily on global Crude inventories, adding further pressure to supply conditions.

According to BNY analyst Bob Savage, war-related and energy-related risks are currently dominating the macroeconomic narrative. He noted that a sustained period with WTI above $90 per barrel could alter expectations for global growth and monetary policy.

The market is also receiving support from the latest US inventory data. The American Petroleum Institute (API) reported that US Crude Oil stockpiles fell by 6.75M barrels in the week ending May 29, compared with a revised decline of 2.8M barrels in the previous week. The drop was significantly larger than the market expectation of a 3.6M drawdown.

Investors now await the official Energy Information Administration (EIA) data later on Wednesday to confirm the continued tightening in US Crude inventories, while geopolitical developments remain the main driver of volatility in the Oil market.