Oil gains on Middle East supply concerns amid impasse in US-Iran war

Oil prices surged on Thursday amid worries that the ongoing standoff between the United States and Iran could further disrupt Middle Eastern supplies and tighten global inventories. Brent crude futures for October delivery rose 35 cents to $91.97 a barrel, while US West Texas Intermediate crude futures for September climbed 17 cents to $86.00 a barrel. The more-active October WTI contract jumped 38 cents to $84.77.

Traders noted that oil prices have remained high as sporadic attacks in the Middle East persist, but the market lacks fresh momentum without a major escalation. Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, noted that "Oil prices remained elevated as the market is supported by sporadic attacks in the Middle East but lacks fresh momentum without a major escalation."

The UAE's decision to halt all financial and economic dealings with Iran until further notice has brought renewed attention to the strained relationship between the key Gulf Arab oil producer and Iran. While President Donald Trump stated there were no ongoing talks with Iran, Iran insisted the Strait of Hormuz remained closed. Shipping traffic through the Strait of Hormuz remained the same as the previous day as peace talks between the US and Iran remained stalled.

The war, which began on February 28, has also affected refined fuel supply and drawn down inventories, with less crude available for refiners. Brent crude climbed nearly 6% last week, leaving traders plenty to consider as the new week begins. US stockpiles of distillate fuel, including diesel and heating oil, dropped for the third consecutive week, according to the Energy Information Administration.

However, crude inventories increased by 4.4 million barrels in the week ending August 14, a larger-than-expected gain compared to estimates of a 600,000-barrel draw.