WTI advances above $82.50 due to mixed signals regarding potential US-Iran deal

• WTI rises amid conflicting reports over US-Iran diplomacy and Strait of Hormuz talks.

• President Trump demanded reparations from Tehran, countering Iran’s recent compensation demands and stalling optimism.

• API data showed US crude stocks surged by 9.1 million barrels, vastly missing expected draws.

West Texas Intermediate (WTI) oil price extends its gains for the third successive day, trading around $82.70 per barrel during the Asian hours on Wednesday. Crude oil prices advance as investors weigh mixed signals regarding a potential deal between the United States (US) and Iran.

Sentiment received an initial boost after Pakistan’s defence minister suggested that Washington and Tehran are “close to some sort of arrangement” to secure the critical Strait of Hormuz. Adding to the diplomatic momentum, reports indicated that parallel talks between Iran and Oman have also reached an advanced stage.

However, market optimism was tempered by escalating rhetoric from the White House. US President Donald Trump adopted a firmer stance, declaring that Tehran should pay reparations for victims of attacks linked to the Islamic Republic. His comments arrived in direct response to a list of demands issued by Iran over the weekend, which included calls for war compensation following US and Israeli military operations in the region.

Oil risk premium builds as US–Iran tensions escalate over Strait of Hormuz

Analysts at Commerzbank highlight that "hopes for a new agreement between Iran and the US in the near future and for the Strait of Hormuz to be reopened are fading." They note that after Iran set out its conditions for reopening the strait at the weekend – including, amongst other things, demands for reparations – US President Trump escalated tensions by responding with "a new demand for compensation payments for the victims of the conflict." This hardening of positions, Commerzbank argues, is helping to entrench the geopolitical risk premium in the energy complex, reinforcing the move in Brent toward USD 90 and gas oil toward nearly USD 1,350 per ton, and tightening the backdrop for European diesel markets despite the region not being directly hit.

Compounding the geopolitical uncertainty, US inventory data delivered a bearish surprise. Figures from the American Petroleum Institute (API) revealed that US weekly crude oil stocks jumped by 9.1 million barrels last week, sharply contrasting with the market's expected decline of 0.5 million barrels and marking the largest inventory surge since February.