WTI Oil appreciates beyond $85.50 as tensions rise in Iran
- WTI Oil prices jump beyond 3% on Monday to reach session highs at $85.76.
- US and Iran exchanged attacks for the first time in one month, adding pressure on Oil prices.
- Iran's Revolutionary Guards warned that vessels attempting to cross the Strait of Hormuz without permission will be targeted.
Crude prices rally on Monday, with the US benchmark West Texas Intermediate (WTI) trading at $85.50 per barrel at the time of writing, more than 3% up on the day so far, drawing close to one-month highs, at $87.38. Hostilities resumed after one month of tense calm in Iran, complicating Oil flows through the Strait of Hormuz even further and reviving concerns of a global Oil shortage.
The US military attacked the Iranian island of Larak on Sunday, where the Islamic Revolutionary Guard Corps (IRGC) were allegedly preparing missiles to place sea mines in the Strait of Hormuz. US President Donald Trump had affirmed earlier on Sunday that the US had cleared mines from the waterway and warned that any ship attempting to place new ones would be “immediately and systematically destroyed.”
Geopolitical tensions resurface as US strike raises risk of renewed escalation
Iran retaliated by targeting US airbases in Jordan and the United Arab Emirates. Iranian President Masoud Pezeshkian said that Tehran is "not looking for war" but that it will not “sit still” in the face of US attacks.
Later on the day, Iran’s Revolutionary Guards affirmed thst an Oil supertanker attempting to cross the Strait of Hormuz without permission was struck by two mines and caught fire and warned that other vessels violating the security rules will face the same fate.
Analysts at Danske Bank note that while the latest military exchange in the region “was limited,” it nonetheless “marks the first US strike on Iran's forces in more than a month and highlights the risk of renewed escalation.” The bank underscores that the return of US action against Iranian assets materially revives geopolitical risk around key energy routes, reinforcing market sensitivity to any further deterioration in tensions.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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