Global energy markets reel as crude prices rebound sharply at Asia open

Global oil markets were thrown back into turmoil on Wednesday morning (March 11) as crude prices rose again at the start of Asian trading, after investors were hit by rapidly shifting signals from President Donald Trump’s administration over the Iran war and shipping through the Strait of Hormuz.

Bloomberg reported that oil prices moved higher in early Asian trade as markets struggled to digest conflicting messages from Washington over the conflict and the safety of tanker traffic through the narrow waterway near Iran. Reuters separately reported that uncertainty over whether the United States had escorted any ships through the strait added to the volatility.

West Texas Intermediate crude for April delivery rose as much as 6.2% to US$88.59 a barrel after slumping 12% on Tuesday, one of the sharpest reversals in recent trading. Reuters said US crude had settled at US$83.45 on Tuesday, while Brent settled at US$87.80 after tumbling 11% on hopes of a possible de-escalation in the Middle East war.

The market has been whipped around this week by confusion over developments in the Gulf. Chris Wright, the US energy secretary, posted on social media that the US Navy had successfully escorted an oil tanker through the Strait of Hormuz, but the post was later deleted.

The White House then said no such escort had taken place. A Department of Energy spokesperson said the clip had been removed after it was found to have been incorrectly captioned by staff.

The Strait of Hormuz normally carries about one-fifth of the world’s oil and liquefied natural gas traffic. Reuters reported that shipping through the vital route has been severely disrupted, with many vessels staying put and the wider market closely watching for any sign that normal trade can resume.

The disruption has already forced major Gulf producers to cut output. Reuters reported earlier this week that Saudi Arabia, Iraq, the United Arab Emirates and Kuwait had together reduced production by as much as 6.7 million barrels a day, equivalent to around 6% of global output.

Investors are also grappling with a stream of contradictory statements from Trump about the conflict, the possibility of de-mining operations in the strait, and how quickly the war might end. On Tuesday, US military officials signalled that operations were intensifying and that diplomatic prospects remained slim, undermining earlier hopes that the conflict might soon ease.

Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, said the market was effectively trading in a fog of war, reacting in real time to events rather than moving in an orderly fashion. She said investors were still facing violent price swings and extreme volatility in crude markets, with headlines driving rapid intraday moves. Bloomberg attributed the remarks to Babin in its market coverage.

The Middle East conflict, now in its second week, has drawn in more than 10 countries and revived fears of a wider inflation shock. Retail petrol prices in the United States have risen sharply, adding to the political and economic pressure on Trump. Reuters has reported that even before the latest rebound, analysts were warning that a prolonged disruption could push oil well above US$100 a barrel.

Saudi Aramco chief executive Amin Nasser warned on Tuesday that the longer the disruption continued, the more severe the consequences would be for global oil markets and the world economy. Reuters described it as his first public comment since the war began to choke Middle East oil flows.

Price update:

WTI crude for April delivery was up 5.9% at about US$88.39 a barrel at 6.55am Singapore time on Wednesday, according to Bloomberg figures cited in market reports. Brent crude for May delivery had settled down 11% at US$87.80 a barrel on Tuesday before the rebound in Asian trading. Reuters confirmed Tuesday’s settlement levels for both major benchmarks.