Oil rebounds as ceasefire hopes fade and Middle East supply fears deepen

Oil prices climbed back on Thursday, recovering from the previous session’s losses as fading hopes of a swift end to the Iran war renewed concerns about prolonged disruption to global energy flows.

Brent futures rose $1.65, or 1.61 per cent, to $103.87 a barrel by early morning trading, while US West Texas Intermediate gained $1.49, or 1.65 per cent, to $91.81 a barrel. Both benchmarks had slumped more than 2 per cent on Wednesday following brief optimism over a possible ceasefire.

That optimism has since evaporated. Iran said it was reviewing a US proposal to end the war but had no intention of holding direct talks, while White House press secretary Karoline Leavitt warned that President Trump would “hit Iran harder” if Tehran failed to accept that it had been “militarily defeated.” The bar Washington has set appears high, leaving markets vulnerable to further swings.

Read Also: US–Israel–Iran Crisis: Focus shifts to economic implications in media reports

Supply pressures building on multiple fronts

The rebound reflects anxiety that extends well beyond the Iran conflict. At least 40 per cent of Russia’s oil export capacity has been halted following Ukrainian drone attacks, a disputed pipeline incident, and the seizure of tankers, according to Reuters calculations. Iraqi output has also slumped, with storage tanks reaching critically high levels, three Iraqi energy officials said on Wednesday. The confluence of disruptions — Iran, Russia, and Iraq simultaneously — is compounding what the International Energy Agency has already described as the biggest oil supply shock in history.

The Strait of Hormuz, through which roughly a fifth of the world’s crude oil and liquefied natural gas passes, remains all but closed. Japanese Prime Minister Sanae Takaichi raised the severity of the situation directly with IEA chief Fatih Birol on Wednesday, requesting an additional coordinated release of strategic oil stockpiles as Tokyo seeks to hedge against a prolonged conflict.

One counterweight to the price pressure is rising US crude inventories, which climbed by 6.9 million barrels to 456.2 million barrels in the week ended 20th March — the highest since June 2024 and far exceeding analyst expectations. For now, however, the balance of forces in the market is pointing in one direction.