Oil Prices Rangebound Amid Strait Attacks and Doubts Over U.S.–Iran Ceasefire
Key Takeaways
- •Brent crude settled at $88.98 per barrel and WTI at $83.27, with both benchmarks gaining only seven cents amid competing market forces.
- •Houthi forces attacked vessels in both the Strait of Hormuz and the Bab el-Mandeb strait, with the Bab el-Mandeb strike resulting in six fatalities.
- •Vessel transits through the Strait of Hormuz dropped to eight on Tuesday, down dramatically from pre-war levels of 125–140 vessels.
- •A senior Iranian source confirmed there are no ongoing discussions with the United States to extend their ceasefire, stating the agreement lacked a defined start date.
- •Both OPEC and the IEA revised their oil demand outlooks downward, with the IEA projecting a 1.6 million bpd demand contraction for the current year and a 4.3 million bpd supply decline in 2026.
Crude oil prices posted minimal gains on Wednesday, as market sentiment was weighed down by a standoff in U.S.–Iran peace negotiations and renewed attacks on vessels transiting the Strait of Hormuz and the Bab el-Mandeb strait. Both chokepoints are critical arteries for global energy trade, with Hormuz alone carrying roughly a fifth of the world's daily oil consumption, meaning even modest disruptions carry outsized implications for supply chains.
Iran-aligned Houthi forces carried out separate attacks in both strategic waterways, with the Bab el-Mandeb strike resulting in six fatalities. The attacks compounded concerns already heightened by data showing that vessel transits through the Strait of Hormuz had fallen to just eight on Tuesday, a dramatic decline from pre-war levels of 125–140 vessels.
On the diplomatic front, a senior Iranian source told Reuters that there were no ongoing discussions between Iran and the United States to extend their ceasefire. From Tehran's perspective, the agreement lacked a defined start date, and therefore there was nothing to extend.
Brent crude settled up 7 cents at $88.98 per barrel, while West Texas Intermediate (WTI) also rose 7 cents to settle at $83.27. The muted price response underscores a market caught between two competing forces: the risk of supply disruption from conflict around key maritime routes and deteriorating demand expectations that are capping any upside.
Meanwhile, both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) revised their oil demand outlooks downward. The IEA projected a contraction of 1.6 million barrels per day (bpd) in demand this year, as well as a 4.3 million bpd decline in supply for 2026. The dual revisions from the two most closely watched forecasters signal a broadly shared assessment of weakening consumption, even as the projected supply decline introduces a separate variable that could tighten markets if geopolitical risks escalate further.
Iran remained the primary focus of market analysis. Tim Waterer, chief market analyst at KCM Trade, stated: "Optimism from earlier in the month is steadily being replaced by a more cautious, risk-premium-driven stance."
Waterer further noted: "The longer talks drag on without visible progress, and the more complex the reported demands become, the greater the scepticism that a workable agreement can be reached quickly."
