Iran-Iraq Tensions Fuel WTI Oil Price Rally
West Texas Intermediate (WTI) oil prices rebounded on Wednesday after touching a two-week low, snapping a three-day losing streak. The commodity gained nearly 4% for the day amid rising tensions between the US and Iran.
The latest development in the Middle East crisis saw Iran's Islamic Revolutionary Guard Corps launch multiple ballistic missiles at US forces in the region on Tuesday. In response, US President Donald Trump reiterated his warning that military operations could resume if negotiations with Iran collapse.
Trump told Fox News that the US would target key Iranian infrastructure, major bridges, and power plants if Tehran fails to reach an agreement. The risk of resumption of hostilities prompted traders to price in a geopolitical risk premium, triggering a goodish recovery in crude oil prices.
The Iran-backed Houthis recently announced a naval blockade on Saudi Arabia in the Red Sea, adding to market concerns about significant disruptions to global oil supplies. A softer US Dollar also offered some support to USD-denominated commodities, backing the case for additional gains as traders await the FOMC policy decision.