Key Moments
- Brent crude futures rose 1.2% to $79.90 per barrel and WTI gained 0.7% to $76.60 per barrel as of 09:21 ET (13:21 GMT).
- Both benchmarks had fallen about 10% over the last two sessions, with Brent dropping below $80 for the first time since early March.
- The International Energy Agency projected a substantial market surplus next year as flows through the Strait of Hormuz recover.
Market Snapshot
Oil prices moved modestly higher on Wednesday, pausing a recent sharp selloff that had dragged benchmarks to their lowest levels in three months. The move came as traders assessed the impact of a preliminary U.S.-Iran peace agreement that could ultimately increase global crude supply.
| Contract | Price (per barrel) | Move | Time |
|---|---|---|---|
| Brent crude futures | $79.90 | +1.2% | 09:21 ET (13:21 GMT) |
| WTI crude futures | $76.60 | +0.7% | 09:21 ET (13:21 GMT) |
Both Brent and U.S. West Texas Intermediate (WTI) futures had slumped roughly 10% over the previous two sessions. Brent’s decline pushed it under the $80-per-barrel threshold for the first time since early March.
Potential Supply Shift From U.S.-Iran Framework Deal
Trading desks remained preoccupied with the possible consequences of a framework peace accord in the Middle East, which could ultimately facilitate the reopening of the Strait of Hormuz and an increase in available crude for global buyers.
According to media reports, the agreement provides that the U.S. will lift its blockade of Iran’s ports, while Tehran will resume maritime traffic through the Strait of Hormuz. The arrangement, which is scheduled to be signed on Friday, would also permit Iran to begin selling its oil immediately upon signing.
IEA Sees Emerging Surplus After Strait Reopening
In its monthly report, the International Energy Agency projected that the oil market will move into a pronounced surplus next year, following a recovery in supply after the strait’s closure. The anticipated normalization of flows is central to the agency’s outlook for a looser balance ahead.
Execution Risks and Shipping Concerns
Despite the framework agreement, there is considerable uncertainty around how quickly the deal will be implemented. Reports indicated that shipping firms are proceeding carefully when it comes to re-routing vessels through the Strait of Hormuz, preferring to wait for more concrete information on security protocols and operational conditions.
Analysts have flagged that restoring fully normalized traffic could take longer than current market expectations, a scenario that could maintain some upward pressure on crude prices. Prices remain above pre-conflict levels, even though they are below peaks reached during the height of hostilities.
Monetary Policy, Inflation, and Energy Prices
The possibility that oil-driven inflation may stay elevated has become a critical factor in central bank deliberations. The Federal Reserve is expected to keep interest rates unchanged on Wednesday, while officials continue to monitor U.S. inflation, which accelerated to a three-year high in May, largely reflecting a jump in retail gasoline prices.
In the prior week, the European Central Bank raised interest rates and cautioned about the effects of an inflation shock stemming from higher energy costs.
In principle, higher interest rates can cool overall economic activity, which could in turn restrain oil demand.
“For investors, the bigger story may be the transition from a geopolitical risk premium to a higher-for-longer rates environment. Markets appear comfortable pricing a de-escalation in the Middle East, but may be underestimating how restrictive monetary policy could remain if inflation proves more persistent than expected,” said Laurence Booth, Global Head of Markets at CMC Markets.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
