Crude oil prices experienced a significant surge of up to 7% on Wednesday, April 29, marking the eighth consecutive day of gains. According to reports from The Wall Street Journal, Brent crude traded at $109.68 per barrel at 4.42 p.m. local time, up around 5% from the previous close of $104.4, while US benchmark West Texas Intermediate increased about 5% to $104.91 per barrel, compared with $99.93 in the previous session. This latest rally builds on the over 50% rally seen in March due to the onset of the US-Israeli war with Iran, with prices now up 4% in April so far. The sustained upward momentum reflects continued market concerns over geopolitical tensions in the Middle East, particularly as US President Donald Trump has instructed his advisers to prepare for a prolonged naval blockade targeting Iranian ports to pressure Tehran into accepting nuclear concessions.
The Energy Information Administration's latest data provided fresh momentum to oil prices, as reported by Mint. Crude inventories fell by 6.2 million barrels to 459.5 million barrels in the week ended April 24, significantly exceeding analysts' expectations for a 231,000-barrel draw. This sharp decline in US oil stockpiles, driven by surging global demand amid the ongoing war, has contributed to the current price surge. The United States has also turned into a net crude exporter on a weekly basis for the first time on record due to these inventory changes.
The crude oil price elevation continues due to energy supply disruption through the Strait of Hormuz, a critical chokepoint accounting for 20% of global oil passage. According to The Wall Street Journal, US President Donald Trump has decided to keep pressure on Iran by targeting its oil revenues and broader economic resources to force Tehran to scale back its nuclear program. The Iranian Revolutionary Guard Corps announced on March 2 that the Strait of Hormuz had been closed to transit following US-Israel strikes on February 28, with ship transits through the Strait of Hormuz falling by 95.3% since the start of the conflict due to restrictions in the waterway. The US has signalled it would maintain a naval blockade of Iranian ports as it tries to force Tehran back to the negotiating table, with Trump viewing resuming airstrikes or withdrawing from the conflict as riskier options than maintaining the blockade.
The geopolitical tensions have created significant market volatility, with the CBOE Volatility Index (VIX) climbing 0.8 points to 19.7, approaching the 20 threshold that marks elevated fear levels. According to The New York Times, national average gasoline prices have climbed to $4.03 a gallon, up 35% since the war began, while diesel prices reached $5.47, up 45% since the conflict began. This pass-through to consumers is driving equity hedging demand and contributing to the elevated VIX levels. The options market shows traders placed $430 million in bets on a drop in crude just 15 minutes before President Trump said he would extend the Iran ceasefire, highlighting the market's sensitivity to geopolitical developments.
