WASHINGTON (dpa-AFX) - Rebounding from yesterday's plunge, crude oil has skyrocketed on Wednesday as the Middle East conflict fails to show any indication of calming down soon.
WTI Crude Oil for April delivery was last seen trading up by $4.21 (or 5.04%) at $87.66 per barrel.
The U.S.-Israel versus Iran war entered day number 12 today.
On Monday, in an interview with CBS News, Trump stated that the war would end very soon, contributing to the nosedive on Tuesday.
Later, angered by a CNN report that hinted Iran's Islamic Revolutionary Guards Corps are laying naval mines near the Strait of Hormuz, Trump warned Iran to remove them or face unprecedented consequences.
Refusing to budge to Trump's threats, the IRGC responded by stating that it would not allow even 'one liter of oil' to pass through the channel until the U.S. and Israeli forces halt their attacks.
With the possibilities for de-escalation fading, oil regained its geopolitical risk premium and prices soared again today.
Investors are shifting away from risky assets to the U.S. dollar.
The U.S. dollar index was last seen trading at 99.24, up by 0.32 points (or 0.32%) today.
Since the start of the war, the strait has been blocked, forcing Arab nations to cut down their production due to storage constraints that has led to huge global oil demand and expanding inflation concerns.
Tanker traffic through the channel has dropped to two per day from an earlier average of 138 vessels per day.
Nearly 150 tankers are anchoring in open gulf waters while nearly 147 container ships are trapped inside the Persian Gulf, struggling to find a way out. Over 20,000 flights have been grounded after the war began.
Economists have forecast that major central banks across the world are likely to hold tight against any rate cut intervention until the Middle East tension melts down.
Meanwhile, 32 member-countries of the International Energy Agency unanimously agreed today to make 400 million barrels of oil from their emergency reserves available to the market to address disruptions in oil markets over a timeframe to be decided soon. IEA members hold emergency stockpiles of over 1.2 billion barrels.
The gulf war has forced major global energy corporations to declare 'force majeure.'
Blockade in the Strait of Hormuz has resulted in 'production pauses' by the largest oil producers in the Middle East, amounting to more than 5 million barrels per day of reduction.
Bloomberg reported that Saudi Arabia slashed production by 2 million bpd, Iraq by about 2.9 million bpd, United Arab Emirates by 500,000 to 800,00 bpd, and Kuwait by nearly 500,000 bpd.
Yesterday, the CEO of Saudi Arabia's oil giant Aramco warned of 'catastrophic consequences' for the oil market and global economy if the Hormuz blockade continues.
Tuesday's data from American Petroleum Institute revealed that crude oil inventories fell by 1.7 million barrels for the week ending March 6.
According to the U.S. Energy Information Administration, for the week ending March 6, crude oil inventories in the U.S. increased by 3.82 million barrels. At the Cushing, Oklahoma delivery hub, inventories decreased to 117,000 from 1,564,000 barrels of the previous week.
For the same period, gasoline inventories dropped by 3,654,000 barrels, distillate inventories decreased by 1,349,000 barrels. However, heating oil inventories rose by 228,000 barrels following the previous week's 355,000 increase.
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