Oil prices rise on Middle East supply concerns as US-Iran talks stall

Oil prices climbed on Thursday amid ongoing apprehensions about potential supply interruptions stemming from the ongoing impasse between the United States, Israel, and Iran. Brent crude for October delivery saw a 26 cent increase, settling at approximately Ksh129.40 per barrel, while September West Texas Intermediate (WTI) futures rose 17 cents to Ksh11,129 a barrel.

The October WTI contract, which has been more actively traded, rose 12 cents, trading close to Ksh11,638. This marked the fifth consecutive day of price increases for both benchmarks, with prices nearing their highest levels since late July. The expiration of September WTI contracts later in the day added to the market's dynamics.

Persistent geopolitical risks in the Middle East continue to buoy crude prices, despite the absence of any significant escalation. Analysts point out that uncertainties surrounding peace negotiations and strained relations with regional powers, such as the UAE, Oman, and Iran, keep the market on high alert. The UAE recently took a significant step by suspending all economic dealings with Iran indefinitely, highlighting the deteriorating relationship between these key Gulf nations, which are major oil producers.

While U.S. President Donald Trump affirmed no ongoing talks with Iran and claimed the Strait of Hormuz remains open, Iranian authorities stated that the vital shipping route remains closed. Shipping traffic data from the Strait of Hormuz, which accounts for about 20 percent of the global oil trade, showed no change since the previous day, reflecting an uneasy stalemate.

The reduced flow of pre-conflict oil through the strait compared to current levels demonstrates the impact on global supply chains. Additionally, refined fuels are also suffering from the supply strain. Restrictions on crude availability have led to production cuts at refineries, causing inventory reductions. U.S. distillate fuel stocks, which include diesel and heating oil, decreased for the third consecutive week, as reported by the Energy Information Administration (EIA).

Conversely, crude oil inventories unexpectedly rose by 4.4 million barrels, significantly more than the expected draw of 600,000 barrels. Market observers are closely monitoring how the deadlock in diplomatic talks and regional tensions will affect ongoing supply constraints. The ongoing standoff over the Strait of Hormuz and volatile relationships within the Gulf add layers of complexity to the already tight global oil market.

With neither side showing signs of compromise and no clear resolution in sight, the crude market seems poised for a cautious yet steady outlook in the near future.