Oil prices settled slightly higher on Wednesday after a volatile trading session, with intense intraday battles between bulls and bears as the broader upward trend remained intact. Brent crude briefly touched the $97 mark during early trading, appearing poised for a breakout, only to sharply retrace by $3.50 later in the session before recovering to close in positive territory. Key international players stepped in to cool tensions during this critical moment, though the market ultimately resumed its upward trajectory.

During a visit to Egypt, Chinese leadership expressed willingness to work alongside regional nations to safeguard international shipping lanes, support the development of good-neighborly relations, and construct a new security framework for the Middle East, which helped ease market anxiety. Investors are now hoping that peaceful forces can promote the convergence of regional interests, gradually build mutual trust, eliminate the root causes of conflict, and establish a fresh security architecture for the region.

Saudi Arabia condemned Iran's attacks on its vessels in the Strait of Hormuz, urging all parties to exercise restraint, halt escalation, respect international law, and return to negotiations to resolve differences through peaceful means. Meanwhile, the Iranian parliament speaker condemned US strikes for causing significant child casualties in an effort to rally international support. President Trump stated that the latest round of strikes against Iran would not last long, while signaling readiness for another potential strike. Iran's response so far has remained largely defensive, with no active moves to expand the conflict, making the trajectory of geopolitical risk critically important for oil prices.

Evening data from the EIA showed US commercial crude inventories fell by 4.45 million barrels for the week ending August 28, surpassing the expected draw of 1.085 million barrels. US Energy Secretary Wright noted that oil flows through the Strait of Hormuz exceeded 17 million barrels on Monday, but warned that traffic through the strait is expected to decline again as both the US and Iran target tankers. The tight supply situation in the crude market persists, though concerns about demand destruction from higher prices are expected to re-emerge as oil climbs further.

After an early morning surge, oil prices engaged in a seesaw battle throughout Wednesday, hovering at the critical threshold of the breakout zone. With the market at a pivotal decision point, developments in US-Iran relations will be paramount. Risk management remains essential, and traders should exercise caution in the current environment.

Daily market snapshot: WTI crude futures rose $0.79, or 0.88%, to settle at $91.01 per barrel. Brent crude futures gained $0.98, or 1.04%, to close at $95.63 per barrel. INE crude futures advanced 2.57% to 694.7 yuan.

In other markets, the US dollar index slipped 0.1% to 99.56. USD/CNY at the Hong Kong exchange rose 0.01% to 6.7183. US 10-year Treasury yields gained 0.12% to 107.5. The Dow Jones Industrial Average rose 0.56% to 53,061.95.

Trump Signals Limited Duration for Strikes While Iran Demonstrates Response Capabilities

President Trump stated the latest round of US strikes against Iran would not last long, while preparing for additional potential action, asserting full control over the strait. On September 1, 2026, US forces launched their largest military operation against Iran's Islamic Revolutionary Guard Corps since July, targeting air defense positions, radar systems, maritime assets and facilities, mine-laying capabilities, and communication sites over approximately six and a half hours.

Iran subsequently executed multi-front retaliatory strikes, downing a US MQ-9 Reaper drone and launching combined missile and drone attacks against American targets in Jordan, Bahrain, Kuwait, and Iraq. The exchange marks a sharp escalation after roughly a month of relative calm, suddenly intensifying Middle East tensions.

The US operation encompassed a wide range of facilities including air defense, radar, maritime, and communications infrastructure. Iran's response, which included shooting down the MQ-9 and launching multi-front counterattacks across four countries, demonstrates its capacity for cross-regional retaliation. Civilian casualties, particularly children killed in an attack on a wedding celebration, have further heightened international concern over the escalation spiral.

The Trump administration has signaled it is in no rush to negotiate, while Iran simultaneously issues diplomatic overtures and displays military retaliation capability. Both sides appear to be leveraging military pressure to strengthen their bargaining positions. Control over the Strait of Hormuz remains the central thread for monitoring the situation's trajectory, with the international community widely fearing this exchange could mark the beginning of another round of escalatory tit-for-tat.

US Treasury Secretary Predicts Hormuz to Lose Relevance Within Two Years

US Treasury Secretary Bessent stated on the sidelines of the G20 finance ministers' meeting that the Strait of Hormuz will become "worthless" to the oil industry within two years, noting the US no longer views it as a "chokepoint". In 2024, only 7% of US crude imports, approximately 500,000 barrels per day, transit the strait, marking the lowest level in nearly four decades, thanks to increased domestic production and higher Canadian imports.

He acknowledged the strait remains a critical route for "many other countries," particularly in Asia, where nearly 34% of global crude transited in 2025. However, he projected future oil supplies would bypass the waterway through overland pipelines. Saudi Arabia and the UAE already operate alternative pipelines, and agreements have been reached for new pipeline construction, though completion will take several years.

The six-month-plus US-Iran conflict has severely restricted strait shipping, pushing Brent crude above $95 per barrel compared to $72.48 before the conflict. US average gasoline prices stand at $4.09 per gallon versus $2.98 prior to hostilities. Washington is applying pressure through military escort operations, blockades of Iranian ports, and economic sanctions, warning nations to sever financial ties with Iran or face exclusion from the dollar system. Bessent stated the goal is to "economically strangle this regime."

Saudi Oil Exports Plunge as Tanker Attack Risks Intensify

Saudi Arabia's observable crude oil exports plummeted to their lowest levels in at least nine years last month amid escalating regional tensions. Tanker tracking data compiled by Vortexa, Kpler, and other firms shows Saudi observable crude exports averaged approximately 3 million barrels per day in August, the lowest since records began in early 2017. This data aligns with assessments from crude traders and individuals familiar with Saudi oil operations.

Saudi vessels have come under attack from Yemen's Houthi forces in the Red Sea, threatening the alternative routes Riyadh has relied upon to avoid the Strait of Hormuz. The sustained attacks have alarmed Saudi customers, some of whom now refuse to use the kingdom's Red Sea ports. This has forced Riyadh to seek longer alternative routes around Africa, adding thousands of miles to voyages and further disrupting global supply chains already strained by six months of regional conflict.