Oil prices surged more than 1% on Wednesday as geopolitical tensions in the Middle East escalated sharply following Iran's missile launches toward Kuwait and Bahrain. Peace negotiations between Tehran and Washington failed to achieve a breakthrough, while the disruption in the Strait of Hormuz continued for the 96th consecutive day.
Market Movements
Brent crude futures rose by $1.05, or 1.09%, to settle at $97.05 per barrel. Meanwhile, US West Texas Intermediate (WTI) crude advanced $1.01, or 1.08%, reaching $94.77 per barrel. The gains were driven by heightened concerns over supply disruptions in the region.
Military Actions and Responses
The price increase followed reports that Iran fired ballistic missiles toward Kuwait and Bahrain. According to the US military, the missiles failed to hit their intended targets. In response, Washington stated that its forces conducted strikes on Iran's Qeshm Island, characterizing the action as a defensive measure against what it described as attempted attacks.
Iran's state-run broadcaster IRIB claimed that the country had targeted US military facilities in Kuwait. "Following the hostile actions of the US in the Persian Gulf, the Strait of Hormuz, and Qeshm Island, American bases in Kuwait were hit," the broadcaster reported. However, Kuwait's Army General Staff stated that its air defense systems intercepted incoming missiles and drones after explosions were heard across the country. The military clarified that the sounds were linked to operations by air defense units responding to hostile aerial threats.
US Central Command (CENTCOM) confirmed that Iran launched several ballistic missiles toward neighboring countries but maintained that "all failed to hit their intended targets." According to CENTCOM, two missiles aimed at Kuwait either fell short or broke apart mid-flight, while three missiles directed at Bahrain were intercepted by US and Bahraini air defense systems.
Diplomatic Stalemate
Markets continued to monitor the conflict closely, with Iran reviewing a proposed agreement with the United States aimed at ending hostilities. Earlier on Tuesday, Iranian media reported that Tehran had not been in contact with Washington for several days. However, US President Donald Trump stated that negotiations had continued without interruption.
Supply Concerns
On the supply front, US crude inventories fell for a seventh consecutive week, according to market sources citing data from the American Petroleum Institute released on Tuesday. Crude stockpiles declined by 6.8 million barrels during the week ended May 29, adding to upward pressure on prices.
Broader Conflict Impact
The conflict, now in its fourth month, began on February 28 when the US and Israel launched joint strikes on Iran. In retaliation, Tehran tightened its grip on the Strait of Hormuz, a vital waterway carrying 20% of the world's energy supplies. The blockade strained fuel shipments, pushing crude prices from around $70 per barrel before the conflict to beyond $125 per barrel, sending shockwaves through global economies. However, prices have eased in recent weeks amid signs of diplomatic efforts, falling below the $100 per barrel mark.
The ongoing tensions continue to pose significant risks to global energy markets, with no resolution in sight despite repeated peace initiatives.
