Oil prices rose on Wednesday as markets questioned whether a potential plan by the International Energy Agency to release record volumes from oil reserves would be sufficient to offset any supply shock resulting from the conflict between the United States, Israel, and Iran.

Brent crude futures climbed $3.52, or about 4%, to $91.32 per barrel by 09:22 GMT. US West Texas Intermediate crude also rose $3.69, or 4.4%, to $87.14 per barrel.

The gains followed Tuesday’s session, which saw a sharp decline of more than 11% for both benchmarks, despite an initial jump of around 5% in US oil prices at market open.

The Wall Street Journal reported that the proposed reserve release could exceed 182 million barrels, surpassing the amount injected into the market by International Energy Agency members during two reserve releases in 2022 following Russia’s invasion of Ukraine.

Analysts at Goldman Sachs said a drawdown of that scale would only offset about 12 days of supply disruption estimated at roughly 15.4 million barrels per day from Gulf exports.

Bjarne Schieldrop said: “The oil market does not appear to believe that the largest release ever from strategic reserves will do much to address the current crisis.”

Escalating military tensions

The United States and Israel carried out heavy airstrikes on Iran on Tuesday in what the Pentagon and Iranian officials described as the most intense day of attacks since the war began.

US Central Command also announced that the US military destroyed 16 Iranian minelaying vessels near the Strait of Hormuz after President Donald Trump warned that any mines placed in the strait must be removed immediately.

Despite Trump’s repeated statements that the United States is ready to escort oil tankers through the strait if necessary, sources told Reuters that the US Navy has so far rejected requests from shipping companies to provide military escorts due to the heightened risk of attacks.

International efforts to contain the crisis

Officials from the Group of Seven held an online meeting to discuss the possibility of releasing emergency oil reserves to calm markets. French President Emmanuel Macron is also expected to host a virtual summit of G7 leaders to address the impact of the Middle East conflict on energy markets.

Ongoing supply concerns

Abu Dhabi National Oil Company ADNOC shut down the Ruwais refinery after a fire broke out at one of the complex’s facilities following a drone attack, marking the latest disruption to energy infrastructure caused by the war.

Shipping data also shows that Saudi Arabia is attempting to increase exports through the Red Sea via the Yanbu port, although volumes remain far below the levels needed to compensate for the decline in supplies through the Strait of Hormuz.

Energy consultancy Wood Mackenzie said the war is currently reducing oil and refined product supplies from the Gulf by about 15 million barrels per day, which could push prices toward $150 per barrel.

Morgan Stanley also warned that even a quick resolution to the conflict could mean weeks of disruptions in energy markets.

In the United States, data from the American Petroleum Institute showed that crude oil, gasoline, and distillate inventories declined last week, signaling stronger demand.

The US dollar held steady on Wednesday as investors maintained limited risk appetite amid ongoing concerns about an escalation of the war in the Middle East.

Although signals suggesting a possible quick end to the war between the United States and Israel on one side and Iran on the other helped cap the dollar’s gains, conflicting developments left traders without a clear direction.

US President Donald Trump suggested on Monday that the war could end sooner than expected, which helped riskier assets recover. However, Iran continued disrupting oil shipments through the Strait of Hormuz, angering Washington.

Chris Beauchamp said: “The market doesn’t believe the conflict is close to being resolved. Investors are eager to hear positive news, but they are unlikely to get it anytime soon.”

Currency moves

The euro held steady at $1.1607 after rising about 0.3% earlier in the session.

The Japanese yen slipped slightly to ¥158.26 per dollar.

The dollar index, which measures the US currency against a basket of six major currencies, edged up slightly to 98.95.

Analysts at Capital Economics noted that the conflict’s impact on global growth and inflation will depend on the duration and scale of energy price increases, which remain uncertain. They added that an extreme scenario—where the conflict lasts several months and damages energy infrastructure—could push the global economy toward stagflation and lead to higher interest rates across most economies.

Oil volatility and uncertainty

Oil prices recovered on Wednesday after earlier losses in the session, amid doubts about whether a potential plan by the International Energy Agency to release oil reserves would be sufficient to offset any supply shock.

Khalid Azim said financial markets can absorb major shocks if the strategic path is clear, adding: “What markets truly suffer from is uncertainty.”

As the conflict entered its twelfth day, the United States and Israel exchanged airstrikes with Iranian forces across the Middle East, while the Iranian government warned that its security forces were ready to confront any potential internal protests.

Monetary policy outlook

Traders are cautiously pricing risks. Christina Clifton said expectations suggest the war may last months rather than weeks, keeping uncertainty elevated.

US interest rate futures indicate markets are pricing about 39.7 basis points of rate cuts by the end of the year, reflecting doubts about the possibility of a second rate cut this year.

Markets have also begun pricing the possibility of a rate hike by the European Central Bank over the past week, although policymakers have stressed the need to wait and reassess monetary policy.

Upcoming economic data

Investors are also awaiting the release of US inflation data for February later on Wednesday. Economists surveyed by Reuters expect core inflation to rise 0.2% during the month and headline inflation to increase 0.3%.

Gold prices rose in European trading on Wednesday, continuing to move in positive territory for the second consecutive day, hovering near a one-week high as the US dollar weakened against a basket of global currencies.

With oil prices declining in global markets, fears of accelerating inflation in the United States have eased, reviving expectations of Federal Reserve interest rate cuts. Investors are now awaiting the release of key US inflation data later today to reassess those expectations.

Price Overview

Gold prices today: gold rose 0.6% to $5,223.09, up from the session opening level of $5,192.02, after touching a low of $5,175.75.

At Tuesday’s settlement, gold prices gained 1.05%, reaching a one-week high of $5,238.60 per ounce.

US Dollar

The dollar index fell 0.2% on Wednesday, resuming losses that had briefly paused in the previous session and trading near a one-week low, reflecting the weakness of the US currency against a basket of major and secondary currencies.

The decline comes as demand for the dollar as a preferred safe-haven asset slows, with growing hopes that the Iran war may soon end following intensified US diplomatic efforts to reach a ceasefire agreement through Russian mediation.

Global oil prices

Global oil prices fell about 5% on Wednesday after the Wall Street Journal reported Tuesday that the International Energy Agency proposed the largest release of oil reserves in its history to rebalance a market severely strained by the fallout from the Iran war and the closure of the Strait of Hormuz.

US interest rates

According to the CME FedWatch tool from CME Group, markets are pricing a 99% probability that US interest rates will remain unchanged at the March meeting, while the probability of a 25-basis-point rate cut stands at 1%.

Markets are also pricing an 87% probability that rates will remain unchanged at the April meeting, while the probability of a 25-basis-point rate cut stands at 13%.

US inflation data

To reassess these expectations, traders are awaiting the release of key US inflation data for February later today, which is expected to influence the Federal Reserve’s monetary policy path this year.

Gold outlook

Bart Melek, global head of commodity strategy at TD Securities, said: “Oil prices have declined from their peak above $100 — which still contributes to inflation and therefore supports gold.”

He added: “Oil prices are no longer high enough to significantly restrict the Federal Reserve’s ability to cut interest rates — investors feel reassured that the currency debasement trade could return over time.”

SPDR fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased by 2.87 metric tons on Tuesday, bringing the total to 1,073.57 metric tons, rebounding from 1,070.70 metric tons, which had been the lowest level since January 9.

The euro rose in European trading on Wednesday against a basket of global currencies, resuming gains that had briefly paused yesterday against the US dollar, and moving higher toward a one-week high as the US currency weakened ahead of key US inflation data.

The single European currency was also supported by falling global oil prices after a Wall Street Journal report indicated that the International Energy Agency is considering the largest release of oil reserves in its history.

Price Overview

Euro exchange rate today: the euro rose more than 0.2% against the US dollar to $1.1636, up from the opening level of $1.1611, and recorded a low of $1.1603.

The euro closed Tuesday’s session down 0.2% against the dollar, marking its first loss in the past three days after earlier reaching a one-week high of $1.1667.

US Dollar

The dollar index fell 0.2% on Wednesday, resuming losses that had briefly paused in the previous session and trading near a one-week low, reflecting weakness in the US currency against a basket of major and secondary currencies.

The decline comes as demand for the dollar as a preferred safe-haven asset slows, with growing hopes that the Iran war may soon end following intensified US diplomatic efforts to reach a ceasefire agreement through Russian mediation.

Later today, key US inflation data for February will be released, which could provide strong and decisive signals regarding the likelihood of the Federal Reserve cutting interest rates during the first half of this year.

Global oil prices

Global oil prices fell about 5% on Wednesday after the Wall Street Journal reported Tuesday that the International Energy Agency had proposed the largest release of oil reserves in its history in order to rebalance a market heavily strained by the fallout from the Iran war and the closure of the Strait of Hormuz.

European interest rates

Money markets are currently pricing about a 5% probability that the European Central Bank will cut interest rates by 25 basis points in March.

To reassess these expectations, investors are awaiting further economic data from the eurozone on inflation, unemployment, and wage growth.