Oil surges as U.S.-Saudi strikes on Iraq shatter diplomatic calm

Oil prices jumped about 7% on Wednesday after airstrikes resumed in the Middle East, wiping out earlier losses that had come on hopes of a diplomatic resolution to the U.S.-Iran conflict. The spike came as President Donald Trump vowed a strong U.S. response to Iran, dashing optimism that had briefly calmed markets following a weekend pause in hostilities.

Prices Reverse Sharp Decline

Brent crude futures settled $6.65, or 7.91%, higher at $90.74 a barrel, according to Reuters, after falling about 5% earlier in the week when a pause in U.S.-Iran strikes had raised hopes of de-escalation. West Texas Intermediate crude settled around 7% higher near $84.60 a barrel.reuters+3

The rally erased declines from Monday and Tuesday, when oil had dropped to two-week lows after the U.S. abruptly suspended air strikes over the weekend. Reports emerged Wednesday that the U.S. and Saudi Arabia carried out strikes against Iran-backed weapons sites in Iraq, while Trump pledged an escalated response.reuters+1

The conflict has disrupted traffic through the Strait of Hormuz, which before the war handled roughly 20% of global oil supplies. In the week ended July 24, crude oil and refined product net exports through the strait averaged just 2.9 million barrels a day, down from 5.9 million the prior week, according to Reuters.reuters+1

Suspicious Trading Under Scrutiny

Separately, the volatile price swings have drawn renewed attention to a pattern of well-timed trading that preceded major war announcements earlier this year. A Reuters analysis found that bets totalling approximately $7 billion were placed on oil prices across various exchanges and fuel derivatives during March and April, just before policy declarations by Trump related to the Iran conflict.reuters

The Department of Justice and the Commodity Futures Trading Commission are investigating at least four such trades worth more than $2.6 billion, according to ABC News. In one instance, traders wagered more than $500 million that oil prices would fall just 15 minutes before Trump announced he would delay strikes on Iran's power grid. Many of the suspicious accounts were newly created and traded only on Iran-related events, with a win rate as high as 93%, according to Yahoo Finance.abc7ny+1

Outlook Remains Uncertain

Analysts warn that further escalation could push prices toward $100 a barrel. "It seems reasonable that prices could continue to climb towards $90-$95 and maybe even touch the $100 mark again because the Strait of Hormuz is repeatedly being disrupted," said Ole Hvalbye, market analyst at SEB Research.cnbc