Oil prices declined on Wednesday as investors reassessed the risk of supply disruptions in the Middle East amid rising tensions between the United States and Iran following strong gains in the previous session.
Brent crude oil, against which Nigerian crude oil is priced, dropped by 93 cents or 1.2% to $75.52 per barrel at 10:18 a.m. in Nigeria while U.S. West Texas Intermediate (WTI) crude declined by 88 cents or 1.2% to close at $73.96 per barrel.
The pullback in oil prices follows a 4% surge on Tuesday driven by heightened geopolitical concerns after U.S. President Donald Trump warned of a potential escalation with Iran, calling for the country’s “unconditional surrender” and suggesting more aggressive military options were under consideration.
Though Trump clarified that Iran’s Supreme Leader Ayatollah Ali Khamenei is not a target “for now,” analysts say the rhetoric indicates a hardening stance.
A source familiar with White House internal discussions confirmed that one of the proposals being evaluated involves direct U.S. military support for Israeli operations targeting Iranian nuclear infrastructure. Such action could significantly widen the ongoing conflict in the region, elevating risks to energy supply chains.
“The biggest fear for the oil market is the shutdown of the Strait of Hormuz,” analysts at ING stated. “Almost a third of global seaborne oil trade passes through this chokepoint. A major disruption could push oil prices as high as $120 per barrel.”
Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), produces approximately 3.3 million barrels of crude per day. Any disruption to its supply could destabilize the global oil market.
In a statement delivered at the United Nations in Geneva, Iran’s ambassador, Ali Bahreini, warned that Tehran would issue a firm response if the United States becomes directly involved in Israel’s military campaign.
Market participants are also monitoring the outcome of the U.S. Federal Reserve’s two-day policy meeting, which concludes later today. While the central bank is widely expected to keep its benchmark interest rate unchanged in the 4.25% to 4.50% range, growing geopolitical instability and slowing global growth could prompt a policy pivot.
Tony Sycamore, market analyst at IG, noted that ongoing conflict in the Middle East and potential demand destruction from elevated oil prices could influence the Fed to implement a 25-basis-point rate cut as early as July, earlier than previously expected.
Meanwhile, industry data from the American Petroleum Institute (API) showed that U.S. crude inventories fell by 10.1 million barrels in the week ended June 13. Official figures from the U.S. Energy Information Administration (EIA) are scheduled for release later Wednesday.
Despite the significant stock drawdown, market sentiment remains fragile amid the growing possibility of a broader regional war. Analysts say the volatility in oil prices is likely to persist as markets continue to digest both supply risks and macroeconomic uncertainties.
