Oil jumps around 5% to two-week high amid escalating Iran tensions

Oil prices jumped nearly 5% on Wednesday, hitting a two-week high after US President Donald Trump warned Iran that the United States will likely engage in additional strikes on Wednesday night after attacks the previous day, adding that they might take over Kharg Island as well.

Brent crude futures were up $3.81, or 5.14%, to $77.97 a barrel at 1339 GMT, while US West Texas Intermediate crude climbed $3.36, or 4.77%, to $73.80 a barrel. The benchmarks hit their highest levels since 22 June earlier in the session.

Both rose about 3% on Tuesday after the US revoked the general license authorising the sale of Iranian crude.

Trump said earlier on Wednesday that the memorandum of understanding signed with Iran to end the conflict was "over," adding he didn't want to engage with Tehran.

"Fundamentally, oil should trade higher – the market had ⁠been eager to find some sort of solution, to be optimistic," SEB Research Ole Hvalbye said, adding that Trump's renewed rhetoric on attacking Iran was also boosting prices.

"We're still not getting everything out of (the Strait of) Hormuz as we should, and inventories in the OECD countries are at 23-year lows."

The agreement, brokered by Pakistan last month to provide a 60-day window for negotiations, came under strain after the US launched fresh strikes on Iran.

The US airstrikes were in response to Iranian attacks on three commercial vessels that were transiting the Strait of Hormuz, US Central Command said on Tuesday. Iran's Revolutionary Guards then said they targeted US military sites in Bahrain and Kuwait early on Wednesday.

The attacks renewed concerns about tanker traffic through the Strait of Hormuz, which carried about one-fifth of global energy supply before the war began in late February.

Iran exports 90% of its crude via Kharg Island, which sits 16 miles (26 km) from Iran's coast in the northern end ⁠of the Gulf, and about 300 miles (483 km) northwest of the strait. Seizing Kharg would give the US the ability to severely disrupt Iran's energy trade.

The Brent crude three-month timespread widened to $2.36 a barrel, its highest since 16 June, extending its move into backwardation after trading in contango as recently as July 6, as traders reassessed near-term supply risks in the Middle East. Backwardation, where prompt crude trades above later-dated barrels, typically signals tighter near-term supply.

Supply fears resurface

"Trump's assertion that the MOU is over raises the ⁠prospect of a re-closing of the Strait as an escalatory cycle begins again," Saul Kavonic, head of research at MST Marquee, said.

At least four oil and gas tankers have turned back from attempting to transit the strait, ship-tracking data showed, as renewed attacks on vessels heightened safety concerns.

After the US and Iran signed their truce last month, oil prices ⁠tumbled to pre-war levels and traders amassed large short positions in oil futures, betting prices would fall further.

Since the start of the conflict, nations have drawn down their inventories to make up for the supply shortfall.

HSBC lowered its Brent crude oil price forecast for 2026 to $80 per barrel from $95, as it assumes a return to normal ⁠Gulf oil exports by the end of September.

Meanwhile, China has lifted refined fuel export restrictions for the rest of July and allowed a private refiner to resume shipments after a four-month halt, trade sources said on Wednesday.