Oil settled flat near multi-month highs as extreme physical disruptions clash with emerging ceasefire rumors

Oil prices ended a volatile Wednesday session largely unchanged, as the severe physical supply threat of a paralyzed Strait of Hormuz collided with reports of preliminary peace negotiations between Washington and Tehran.

Brent crude futures settled flat at $81.40 a barrel, holding at January 2025 highs. US WTI crude edged up 10 cents, or 0.1%, to $74.66 a barrel.

Brent initially surged past $84 a barrel as the Strait of Hormuz remained closed for a fifth consecutive day, choking off critical global energy flows. This transit paralysis is forcing immediate physical supply destruction; Iraq has already slashed output by 1.5 million barrels per day due to severed export routes, with up to 3 million bpd at risk of being shut in within days as domestic storage maxes out.

However, the morning rally sharply reversed on reports that Iranian intelligence operatives signaled an openness to the CIA regarding potential ceasefire talks. This rapid unwinding of the intraday risk premium was compounded by fundamentally bearish domestic data, as the US Energy Information Administration reported a massive 3.5-million-barrel crude inventory build, pushing stockpiles to a three-and-a-half-year high.

Market focus now shifts to the logistical reorganization of global crude flows. With major Asian importers scrambling for alternative supplies, the White House is floating aggressive countermeasures, including US Navy escorts for commercial tankers and federal maritime insurance. Despite ample global floating storage, extreme price volatility is expected to persist until a safe transit route is secured.

Written by: Aiman Haikal