The largest exchange of fire between the United States and Iran since July produced a turbulent session for oil trading on Wednesday, with prices swinging between gains of as much as $2 per barrel and losses of $1 per barrel.

By 1448 GMT, however, trading had turned muted: Brent crude rose 25 cents to $94.90 per barrel, while West Texas Intermediate was up 10 cents at $90.32.

Although commentators revived the familiar argument that renewed military confrontation between Washington and Tehran could further tighten already constrained world supply, the prevailing view appeared to be that such fears may be overblown. The Strait of Hormuz is typically the world's most important oil chokepoint, with roughly a fifth of globally consumed petroleum liquids normally passing through it, which is why disruptions there tend to ripple across crude benchmarks worldwide.

"While the increase in conflicts will slow transit through the Strait of Hormuz in the near term, the market has absorbed the fact that workaround crude oil supplies can still make it to the market eventually," said Dennis Kissler, senior vice president of trading at BOK Financial.

Some of the supply concern stemmed from warnings by the Islamic Revolutionary Guard Corps that U.S. attacks would further restrict traffic through the strait. U.S. Secretary of Energy Chris Wright, however, reported that 17 million barrels of oil transited the waterway on Monday — the largest volume of crude to make the passage since the war began seven months ago.

The suggestion that physical supply conditions may be improving despite the worsening military situation prompted EnergyNow Media to observe: "This creates an unusually binary market: a fresh attack that closes or materially restricts Hormuz could quickly push Brent toward or above $100 per barrel, while successful negotiations and sustained high tanker flows could strip several dollars of geopolitical premium from crude."

Some business sectors nonetheless warned of headwinds stemming from the conflict. Ryanair, Europe's largest low-fare airline and one of the most heavily hedged carriers, said on Wednesday that some of its less well-hedged competitors could struggle to survive the winter amid high jet fuel costs, currently hovering at around $140 per barrel. Elevated jet fuel prices flow directly into airline operating costs, and carriers without extensive hedging programs have thinner buffers against sustained fuel spikes, which is why analysts watch comments from heavily hedged operators like Ryanair as a gauge of sector-wide stress.

Meanwhile, three sources close to the matter told media that the Organization of the Petroleum Exporting Countries (OPEC) will likely leave its oil production policy unchanged for October when its core members meet on Sunday. The group and its allies in the OPEC+ alliance, which includes Russia, have been gradually unwinding earlier production cuts, meaning any decision on Sunday will shape how much spare capacity remains available to offset conflict-driven supply losses.

Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman spent most of this year raising their monthly production quotas. Actual production, however, has lagged, as the Iran war disrupted exports through the Strait of Hormuz, while the war in Ukraine has compromised exports from Russia and Kazakhstan.

Source: Ship & Bunker