After three consecutive sessions of steep declines, international crude oil prices staged a powerful rebound on Tuesday.
The primary catalyst was the outbreak of new armed clashes in the Middle East, escalating threats to energy transport corridors and reigniting market concerns over crude supply disruptions.
Market data shows West Texas Intermediate crude futures on the New York Mercantile Exchange surged as much as 5% intraday, breaking above the $83 per barrel mark and partially recovering from the roughly 14% cumulative drop over the prior three days. Meanwhile, London Brent crude settled near $84 per barrel on Tuesday.
On the geopolitical front, the U.S. military issued a statement on social media platform X, stating that its forces stationed in the Middle East successfully intercepted what it described as a "attempted surprise attack" originating from Iran.
Additionally, according to sources, Iran-backed Iraqi militia groups launched drones at oil facilities in Saudi Arabia's Eastern Province for a second consecutive day. This action puts additional pressure on the Saudi kingdom, which is already grappling with limited crude export capacity due to a maritime blockade.
Saudi Arabia's Defense Ministry confirmed it had intercepted the incoming drones on Tuesday but did not clarify whether the oil facilities were damaged in the attack.
This month, the crude oil market has experienced extreme volatility. At the beginning of the month, prices soared as hostilities between the U.S. and Iran escalated again, and Yemen's Houthi group threatened to blockade Saudi ports, spreading conflict to the Red Sea region. Subsequently, as tensions temporarily eased, prices gave back some of those gains.
Currently, market focus has shifted back to actual crude supply, with shipping through the Strait of Hormuz still facing obstacles and transit capacity remaining severely constrained.
In diplomatic efforts, Iran indicated that it had informed Oman that the latter's proposal for managing the critical Strait of Hormuz waterway—a 50-50 split of control between Iran and Oman—was not acceptable to Tehran.
Iran's Deputy Foreign Minister, Kazem Gharibabadi, stated firmly on state television that entry routes must be entirely under Iranian control, and that Iran must also control a portion of the exit routes.
On the diplomatic front, signs of dialogue have also emerged. U.S. President Donald Trump met with visiting Israeli Prime Minister Benjamin Netanyahu, as Washington seeks to avoid triggering further bombardment inside Iran.
Israel, a key ally that launched joint military operations with the U.S. in February, signalled a preference for negotiations during this meeting. Following the talks, an Israeli spokesperson stated that all parties involved are leaning towards taking the "easy path" of resolution through negotiation, rather than the "hard path" of military action.
Regarding the market outlook, Rob Thummel, Senior Portfolio Manager at asset management firm Tortoise Capital Advisors LLC, commented: "Near-term crude futures contract prices have downside potential, but unless a diplomatic solution is reached, longer-dated contract prices are likely to move higher."
New data also supports the pressure on the supply side. According to documents, the American Petroleum Institute reported that U.S. commercial crude oil inventories fell by 3.3 million barrels last week, and stocks at the key delivery hub of Cushing, Oklahoma, also declined.
More official inventory data from the U.S. Energy Information Administration is scheduled for release later on Wednesday, which will provide further market guidance.
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