Oil settles nearly flat after volatile day of ship attacks, demand cuts

Oil prices whipsawed on Wednesday as attacks on two vessels near critical Middle Eastern shipping lanes collided with bearish demand data, leaving crude caught between geopolitical risk and weakening consumption forecasts.

Brent crude settled up 7 cents at $88.98 a barrel after swinging more than $1 in both directions during the session, according to Reuters. U.S. West Texas Intermediate also rose 7 cents to $83.27. The muted close belied the day's volatility — both benchmarks had jumped more than a dollar early in the session before retreating as forecasters slashed their demand outlooks.hi99+1

Shipping Attacks and a Closed Strait

The United States and Yemen's Iran-aligned Houthis reported separate attacks on shipping in the Strait of Hormuz and the Bab al-Mandab Strait on Tuesday, two crucial export routes for Middle Eastern oil. Shipping data showed just eight vessels transited the Strait of Hormuz on Tuesday, down from pre-war averages of 125 to 140 per day.jordannews+2

Mohsen Rezaei, secretary-general of Iran's Supreme National Security Council, said the strait would remain closed unless the United States accepted Tehran's conditions, including the release of frozen Iranian assets and an end to regional conflicts. A senior Iranian source told Reuters on Wednesday that there had been no discussions between the two sides to extend their ceasefire, since Tehran considers the deal to have no start date.globalbankingandfinance+1

"The continued strength in oil prices comes as markets grow increasingly doubtful that an agreement can soon be reached to ease disruptions to crude flows from the region," said Simon-Peter Massabni, head of business development at brokerage XS.com.globalbankingandfinance

Demand Cuts and a Surprise Inventory Build

Offsetting the supply fears, OPEC lowered its 2026 global oil demand growth forecast to 580,000 barrels per day, while the International Energy Agency said it now expects consumption to contract by 1.6 million barrels per day this year as higher prices and restricted fuel supplies curb demand.reuters+1

The U.S. Energy Information Administration reported that commercial crude inventories rose by 17.4 million barrels in the week ended August 7 — the largest weekly build since January 2023 — as exports slumped. Stockpiles climbed to 424.4 million barrels, far exceeding analysts' expectations for a 1.4-million-barrel draw.finimize+1

A Market Between War and Recession

The tug-of-war left traders navigating what Priyanka Sachdeva of Phillip Nova called a market "swinging like a pendulum between $70 and $90 a barrel" as the Middle East oscillates between deal and war. Simon Wong, portfolio manager at Gabelli, framed the longer-term question: with Asian refiners already cutting runs due to supply shortages, "after the war, how much of that demand will actually come back? I don't think all of it will".jordannews+1