Oil Surges Over 7% on Iran Conflict Escalation, EIA Reports Inventory Build

Oil prices surged more than 7% on Wednesday, July 8, reaching two-week highs after the U.S. declared an interim ceasefire with Iran "over," escalating fears of a major supply disruption. West Texas Intermediate (WTI) crude was trading at $75.73 per barrel, a gain of $5.29 or 7.51%, according to live price data. Brent crude traded at $80.08, up $5.92 or 7.98%.

The price spike followed a statement from U.S. President Donald Trump dismissing the recent memorandum of understanding with Iran as a "waste of time," according to OilPrice.com. This came in response to Iranian attacks on three commercial vessels in the Strait of Hormuz on Tuesday, which prompted retaliatory U.S. airstrikes inside Iran. In a critical escalation, Iran's Khatam al-Anbiya Central Headquarters announced the formal closure of the Strait of Hormuz, a chokepoint for about 20% of global oil trade. The Trump administration also revoked a temporary sanctions waiver that had allowed Iran to sell oil.

The immediate market impact was severe. Freight rates for tankers in the Gulf surged as shipowners demanded higher risk premiums, and Asian refiners began scrambling for alternative cargoes from West Africa, the U.S., and Latin America, OilPrice.com reported.

Countering the geopolitical surge, the U.S. Energy Information Administration (EIA) reported a surprise 3.0 million barrel build in commercial crude oil inventories for the week ending July 3. This brought stockpiles to 411.4 million barrels, which are still 6% below the five-year average for this time of year, according to the EIA data cited by OilPrice.com. The report also showed a large 5.0 million barrel draw in distillate inventories, now 12% below the five-year average, and a 1.9 million barrel draw in gasoline stocks.

For Bakken operators, the sharp rise in benchmark prices is a direct positive, though the region's crude trades at a discount. The live Bakken differential was reported at $-3.42 versus WTI, meaning Bakken crude would be priced near $72.31. The price jump improves cash flow and margins for producers, potentially supporting drilling activity. However, the closure of the Strait of Hormuz introduces significant volatility and could complicate global trade flows, potentially increasing demand for U.S. crude exports, including from the Bakken.

In related news, the price volatility underscored the value of hedging. UK airline Jet2 revealed a £388 million (approximately $500 million) balance sheet boost from favorable movements in its jet fuel derivatives, as it had locked in lower prices before the conflict escalated, according to a separate OilPrice.com report.