Crude oil climbed sharply Wednesday as President Trump escalated rhetoric over Iran, yet traders are signaling they don't expect full-scale war to return. Brent crude reached $77.53 per barrel, up roughly $5 from Monday's close after Trump declared negotiations with Iran a "waste of time" despite saying talks could continue.
The price movement follows a fresh round of U.S. strikes on Iran, retaliation for Iranian attacks on commercial shipping in the Strait of Hormuz. The tit-for-tat cycle has rattled global energy markets, but the reaction Wednesday reveals an important caveat: oil hasn't approached the levels seen this spring, when Brent briefly touched $126 in April.
That gap speaks volumes. If markets truly feared a return to open conflict with sustained shipping disruptions and production cuts across the region, crude would be climbing much higher. Instead, traders appear to be pricing in near-term friction without expecting prolonged economic damage to oil flows.
The U.S. Treasury Department on Tuesday revoked temporary waivers that had allowed Iran to export oil under a memorandum of understanding. The move signals toughening U.S. posture but doesn't eliminate Iranian sales capacity. Analysts at ING noted the revocation carries more symbolic weight than practical disruption, registering as a sentiment risk rather than an immediate market shock.
Energy consultant Rystad Energy warned that uncertainty will remain elevated regardless of physical supply disruptions. Vessel safety concerns, insurance costs, potential delays, and the risk of further retaliation could keep volatility alive in coming weeks. Traffic through the Strait of Hormuz will likely stay depressed until the security picture becomes clearer and diplomatic options remain visible.
One wild card looms for American consumers. U.S. gasoline prices have been falling for weeks, but if crude continues climbing, that reprieve could end. A sustained oil rally would push pump prices higher just as drivers have grown accustomed to relief.
Crucially, substantial volumes of crude have already moved out of the region by tanker in recent weeks, easing overall market balances. That cushion may be protecting prices from more violent swings as tensions simmer.
Author James Rodriguez: "The oil market is scared but not panicked, and that's the real story here."
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