The US-Iran conflict has intensified with President Trump threatening Iran with additional military action, stating the US would 'hit Iran hard again today' without naming specific targets. According to reports from BeInCrypto, US forces struck sites near the Strait of Hormuz, while Iran launched drones at the US Fifth Fleet in Bahrain. The latest developments include Iran's Revolutionary Guards carrying out missile and drone attacks on US military bases in Jordan, Kuwait and Bahrain, as reported by Responsible Statecraft. Iranian state media reports around 20,000 Iranians have lost access to drinking water after two reservoirs were reportedly hit by US strikes. Despite these escalations, WTI crude climbed only 2.1% to $91 per barrel on Wednesday, demonstrating the market's resilience to geopolitical tensions.
Despite the geopolitical tensions, oil prices remain 25% below their April peak due to three key market forces. As reported by BeInCrypto, Chinese crude imports have dropped to multiyear lows, significantly reducing demand from one of the world's largest oil consumers. Additionally, governments have released emergency reserves at scale, providing additional supply to the market. The paper-to-physical oil price gap that emerged during the crisis, when physical Brent hit $141 while futures traded near $107, has since narrowed considerably. According to Responsible Statecraft, the Strait of Hormuz has been closed for approximately 100 days, with the US naval blockade unable to reopen it, while Iranian stockpiles remain in Iranian hands.
Trump revealed Wednesday that the US has secretly moved more than 200 commercial ships and 100 million barrels of oil through the Strait of Hormuz since directing a 'secret mission.' According to BeInCrypto, people with knowledge of the operations confirmed that at least some ships crossed under cover of darkness with lights switched off. This covert supply flow, alongside collapsed Chinese demand and emergency reserve releases, explains the market's relative resilience to the geopolitical tensions. As reported by Responsible Statecraft, the US military said it had completed strikes against Iran that were reportedly in response to the downing of a US Apache helicopter near the Strait of Hormuz, though the helicopter was brought down by an Iranian drone. Market expert Vandana Hari from Vanda Insights notes that Brent crude has fallen substantially from its recent highs, around $83-84, significantly down from the peak of about $11 lower than where it was on February 27 before the war began.
US government data shows stockpiles fell 7.2 million barrels last week, marking a seventh consecutive weekly decline that surpassed expectations of a 4-million-barrel draw. As reported by BeInCrypto, supplies at the Cushing, Oklahoma hub also fell, though they held above operational minimum thresholds. Shell CEO Wael Sawan explained that 'the market is trying to find some equilibrium. It's more driven by short-term headlines.' The ceasefire agreed in late April has broken down, with StoneX market analyst Fawad Razaqzada telling Bloomberg that risks to crude forecasts remain 'tilted to the upside.' According to Responsible Statecraft, the Apache helicopter costs between $52 million and over $100 million, while an Iranian Shahed drone costs roughly $35,000, highlighting the significant cost disparity in the current military confrontation.
Market expert Vandana Hari from Vanda Insights cautions against declaring victory in the oil market recovery, anticipating a holding pattern until a formal memorandum of understanding is signed, with a gradual reopening of key energy routes expected to take months. Speaking to ET Now, Hari said traders are likely to remain nervous until the MoU is actually signed, noting 'there is the anxiety-riddled four days that I anticipate until the MoU is actually signed, provided it is signed on Friday, as is currently scheduled to be.' She expects normalization of traffic and production to take at least two to three months across the Persian Gulf region. Hari disagrees with claims of permanent demand destruction, arguing that what occurred was temporary demand erosion across certain fuel categories, with much of the curtailed demand expected to return quickly as prices stabilize. She believes crude prices will not revisit the lows seen before the conflict, with $60-65 levels unlikely anytime this year and potentially not even in early 2027.
