Oil prices extended gains for a third straight session on Wednesday as hopes of a near-term peace agreement between the US and Iran faded, while renewed fighting in the Middle East added to concerns over global crude supplies. Brent crude climbed towards $97 a barrel, while US benchmark West Texas Intermediate traded near $95. The latest advance comes after oil prices gained more than 7% over the first two trading sessions of the week.
The rally reflects growing uncertainty over the future of energy exports from the Persian Gulf, particularly through the Strait of Hormuz, a key shipping route for global crude supplies.
Market sentiment has shifted sharply in recent days as negotiations aimed at reducing tensions in the region appear to be losing momentum.
While US President Donald Trump said he remains optimistic about reaching an interim agreement with Tehran, reports of stalled discussions and continued military activity have raised doubts over how quickly a diplomatic breakthrough can be achieved.
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The uncertainty has complicated expectations for the resumption of oil flows from the region. Traders had previously bet that a deal could lead to a quicker reopening of supply routes and help ease pressure on global inventories. Instead, delays are increasing concerns that countries may need to rely more heavily on existing crude stockpiles while waiting for exports from the Persian Gulf to normalise.
Geopolitical risks intensified after fresh hostilities erupted across the Middle East. Israel continued military operations in Lebanon, while Iran reportedly launched ballistic missiles toward Kuwait and Bahrain. US forces also carried out strikes on Iran's Qeshm Island, according to US Central Command.
Another round of talks between Israel and Lebanon is scheduled for Wednesday, though markets remain cautious about the prospects of a durable ceasefire.
Beyond geopolitics, supply fundamentals are also providing support to prices. Industry data showed US crude inventories fell by 6.8 million barrels last week. If confirmed by official government figures, it would mark the sixth consecutive weekly drawdown, pointing to continued tightness in the world's largest oil market.
At the same time, elevated volatility has prompted traders to reduce risk exposure. Open interest in Brent crude futures has fallen to its lowest level since August, highlighting the degree of uncertainty surrounding the outlook for both diplomacy and oil supplies.
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