Oil Prices Rise as Iran Conflict Escalates

West Texas Intermediate (WTI) oil prices gained as much as 3% to $89.87 a barrel on Thursday, following a volatile session as escalating rhetoric over the Iran war raised concerns over a prolonged conflict. This marks the second consecutive day of gains for WTI.

The Iran-Iraq conflict has led to a near-closure of the Strait of Hormuz, a crucial waterway through which a fifth of global oil typically flows. The Strait remains effectively closed to shipping, with three vessels being hit by suspected projectiles in the narrow waterway and the Persian Gulf on Wednesday. This has resulted in major Gulf producers cutting output and driven up energy prices of crude, natural gas, and products such as diesel.

In an attempt to alleviate the situation, the International Energy Agency (IEA) agreed to an unprecedented release of 400 million barrels of crude reserves. However, the lack of clarity surrounding the US release plans has raised concerns among traders, with President Donald Trump indicating that he would tap the stockpiles but offering scant detail.

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The escalating conflict has raised concerns about an inflation crisis, with the market keenly watching for normal trade to resume in the region. As the war enters its second week, the market remains uncertain about the impact of the conflict on global energy prices.