Oil prices wobble as Iran-Israel war enters sixth day

Global oil prices paused their rally on Wednesday amid mounting Middle East tensions, fears of US intervention in Iran-Israel conflict shaking energy markets slightly.

Forbes recorded a spike of over 4% on Tuesday, Brent crude edged up just $0.16 to $76.61 per barrel, while U.S. West Texas Intermediate (WTI) ticked up $0.17 to $75.01. Both benchmarks had dipped by more than 1% earlier in the session.

“The biggest fear for the oil market is the shutdown of the Strait of Hormuz,” analysts at ING Bank wrote. “Nearly a third of global seaborne oil flows through this chokepoint. If disrupted, prices could surge to $120 per barrel.”

Markets were rattled by tough rhetoric from U.S. President Donald Trump, who demanded an “unconditional surrender” from Iran via social media on Tuesday.

In response, Iran’s Supreme Leader Ayatollah Ali Khamenei flatly rejected the ultimatum on Wednesday.

Trump said there was “no intention to kill Khamenei — for now,” hinting at possible direct military strikes.

A senior source confirmed that the White House is reviewing options, including joining Israel’s air campaign targeting Iranian nuclear infrastructure.

In Geneva, Iran’s UN ambassador Ali Bahreini warned that Tehran would retaliate against any direct American involvement in Israel’s operations.

Despite the price pullback, energy analysts say markets remain on high alert.

Iran, OPEC’s third-largest oil producer, pumps around 3.3 million barrels per day (bpd) — making its output critical to global supply.

“Even if there’s no outright war, the threat of missile attacks on oil tankers or terminals in the Gulf region is enough to keep traders jittery,” said Ahmad Ghaddar, senior oil markets analyst.

Also weighing on sentiment is the U.S. Federal Reserve’s two-day policy meeting, set to conclude later today.

The Fed is widely expected to hold rates steady, but speculation is growing that it may cut by 25 basis points in July, sooner than previously expected.

“Middle East instability and potential oil-driven inflation complicate the Fed’s path,” said Tony Sycamore of IG Markets. “High oil prices might force the Fed to delay cuts despite slowing growth.”

Meanwhile, U.S. crude inventories fell sharply, down 10.1 million barrels last week according to API data, signaling strong demand or disrupted supply.

Official numbers from the Energy Information Administration (EIA) are due later Wednesday.

The oil market is at a tipping point—balancing fears of a broader Middle East war, potential Strait of Hormuz closures, and the Fed’s next move.

Traders are watching every missile, every word from Washington and Tehran, and every barrel flowing through the Gulf.

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