West Texas Intermediate oil for November settled higher on Thursday, ending up 2.45 cents, or 2.66%. Gasoline for November, by contrast, finished lower, down 0.0074 cents, or 0.22%, as traders weighed fresh developments in the Middle East alongside shifting expectations for supply flows.
Key takeaways
- WTI rallied on Thursday, closing up 2.66%, while November gasoline slipped 0.22%.
- Middle East escalation initially lifted crude—after Iran threatened to widen conflict and Saudi Arabia said it came under missile attack from Yemen’s Houthis.
- Negotiation optimism cooled the surge later in the session after a Reuters report said US and Iranian negotiators were exploring a phased deal involving reopening the Strait of Hormuz.
- Route disruptions remain a key swing factor as Red Sea and Hormuz risks continue to influence supply expectations, with gasoline also reflecting weaker near-term balance.
- Investors now focus on whether geopolitical headlines translate into sustained physical supply tightness or easing risk premia.
What drove the move
Crude oil prices jumped earlier in the day as fears grew that the US-Iran standoff could intensify and further strain global shipping routes. The catalyst was Iran’s warning that it may expand the war toward the Indian Ocean if the US or Israel attacks again, according to commentary attributed to a senior member of Iran’s Revolutionary Guard Corps.
Additional support came after Saudi Arabia said it was hit by missiles fired by Houthis based in Yemen. The report described missiles targeting the Red Sea port of Yanbu and the city of Taif, reinforcing concerns that energy infrastructure and export logistics in the region remain vulnerable.
However, crude gave back some of its gains as the session progressed. A Reuters report said US and Iranian negotiators are discussing a phased agreement that would include reopening the Strait of Hormuz and lifting the US blockade of Iranian ports, with Qatari officials acting as mediators. The prospect of reduced geopolitical risk pushed prices off their intraday highs.
How negotiation hopes reshaped crude and gasoline
The mixed settlement pattern highlighted how tightly oil and refined products are tied to the expected ability to move crude through key chokepoints. Initial crude strength reflected a higher risk premium tied to the Strait of Hormuz and Red Sea shipping uncertainties. The market then reassessed the likelihood and timing of any de-escalation.
Gasoline moved in the opposite direction, turning negative despite the crude strength earlier. That divergence suggests traders were less convinced that any near-term improvements to crude logistics would immediately translate into better refined product economics or tighter gasoline balances. Instead, the session’s net read-through pointed to shifting expectations for supply and demand across the refined slate.
Broader supply picture: Hormuz, the Red Sea, and Russia
The geopolitical backdrop has continued to influence physical supply assumptions well beyond Thursday’s headline cycle. Saudi Arabia has reportedly increased reliance on Red Sea exports over the past two months after the closure of the Strait of Hormuz, but escalating Houthi activity has complicated that rerouting.
Separately, Saudi Arabia said it shut down its key East-West pipeline—an approximately 750-mile route that carries crude away from the Persian Gulf toward the Red Sea for loading on tankers—after precautionary measures following attacks. Saudi officials also indicated plans for a meaningful resumption by Saturday. In the background, concerns remain that disruptions along Red Sea access routes could limit the pace at which Middle East crude is delivered to global markets.
Outside the Middle East, multiple reports described tighter crude availability linked to Russia’s energy infrastructure. Ukraine’s drone attacks have been cited as constraining Russian crude processing and exports. The knock-on effects have mattered for global balancing, particularly as the market also monitors demand sensitivity to higher prices.
Balancing forces: demand risk versus OPEC supply decisions
While the day’s price action leaned on geopolitical risk and potential negotiation pathways, longer-running fundamentals have continued to pull in different directions.
The International Energy Agency has warned that elevated oil prices and restricted supply are set to drive the largest drop in global oil demand since the Covid-19 pandemic. The agency also raised its estimate for the year’s global oil deficit to 1.7 million barrels per day from 1.3 million barrels per day, attributing the wider gap to supply restrictions tied to the US-Iran war. The IEA also said the return to a global oil surplus has been pushed out to 2027, later than an earlier estimate.
On the supply side, OPEC delegates approved a final increase of 188,000 bpd for September, restoring all 1.65 million bpd of supply cuts implemented in 2023. OPEC said it planned to hold output steady for the rest of the year after the September adjustment; still, implementation could be difficult amid persistent military attacks in the region. Recent OPEC data cited in the coverage showed August crude output fell by 900,000 bpd to 19.91 million bpd.
What to watch next
With crude prices still reacting to rapidly shifting Middle East headlines, investors will likely track further updates on any US-Iran talks and the practical risk environment for shipping through the Strait of Hormuz and the Red Sea. Near-term attention will also remain on weekly inventory and production signals from the US, along with any additional guidance from OPEC and demand assessments from the IEA. The next major catalysts are likely to include subsequent inventory releases and continued developments around negotiations and regional attacks.
