By Arathy Somasekhar and Trixie Yap
March 4 (Reuters) – Oil prices rose 1% on Wednesday as the U.S.-Israeli war on Iran disrupted Middle East supplies, but the pace of gains slowed from past sessions after President Donald Trump raised the possibility of the U.S. Navy escorting vessels through the Strait of Hormuz.
Brent rose $1.17, or 1.4%, to $82.57 a barrel by 0408 GMT, after closing at its highest since January 2025 on Tuesday.
U.S. West Texas Intermediate crude rose 72 cents, or 1%, to $75.28, after settling at its highest since June. Both rose by around 5% or more in the past two sessions.
“Right now, geopolitics has clearly overtaken the usual price drivers like inventory data, U.S. economic numbers or OPEC commentary,” Phillip Nova senior market analyst Priyanka Sachdeva said.
“In the near term, the key pointers to watch are physical export data from the Gulf, any confirmed tanker incidents, U.S. naval movement, and Iran’s tone,” she added.
Israeli and U.S. forces struck targets across Iran on Tuesday, prompting Iranian strikes against energy infrastructure in a region that accounts for just under a third of global oil production.
Iraq, the second-largest crude producer in the Organization of the Petroleum Exporting Countries, has cut output by nearly 1.5 million barrels a day, about half its production, due to storage limits and the lack of an export route, officials told Reuters. They said the country may have to shut its nearly 3 million bpd of output within days if exports do not resume.
Iran has also targeted tankers in the Strait of Hormuz, through which about a fifth of the world’s oil and liquefied natural gas flows. Traffic through the Strait remains effectively closed.
Trump has said that the U.S. Navy could begin escorting oil tankers through the Strait of Hormuz if necessary, adding he had ordered the U.S. International Development Finance Corporation to provide political risk insurance and financial guarantees for maritime trade in the Gulf.
“The promise of such guarantees comes as insurers are cancelling war risk coverage for vessels moving through the Strait of Hormuz. This is welcome news, but clearly it won’t happen overnight. Naval escorts would be helpful, but again, this effort will take time,” ING analysts said in a note.
Countries and companies have begun seeking alternative routes and supplies. India and Indonesia said they were looking for other energy supplies, while some Chinese refineries were shutting or moving up maintenance plans.
In the United States, crude stocks rose by 5.6 million barrels last week, according to market sources citing American Petroleum Institute figures, well above the 2.3 million barrels analysts projected. Official figures from the U.S. government are expected later on Wednesday.
(Reporting by Arathy Somasekhar and Trixe Yap; Editing by Himani Sarkar)
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