Oil prices swung sharply on Wednesday morning after a cargo ship was hit in the Strait of Hormuz and reports emerged that the International Energy Agency had proposed the largest ever release of strategic oil reserves.
Brent crude (BZ=F) futures rose 1.2% to $86.32 a barrel , having surged past $100 a barrel on Monday morning, while West Texas Intermediate (CL=F) climbed 2.2% to $85.31 at the time of writing.
The international benchmark, dropped as far as 1.8% towards $86 a barrel but also rose as much as 3.7% to $91 overnight as Israel and Iran exchanged fire, with Tehran targeting the region’s oil industry and infrastructure.
Western nations are expected to decide later on Wednesday on the International Energy Agency’s (IEA) proposal to carry out the largest release of oil reserves in its history to bring down crude prices that have soared during the US-Israel war, according to the Wall Street Journal. The G7 ministers have said they support in principle the use of strategic reserves.
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Kerstin Hottner, Vontobel Asset Management’s head of commodities, said: “Several major questions loom over the oil market’s trajectory. Chief among them is the timing of safe passage for vessels through the Strait of Hormuz, a critical chokepoint for global oil supply.”
“Another concern is the possibility of infrastructure damage… Even if major hostilities subside, the prospect of ongoing low-level Iranian drone attacks on energy infrastructure could prolong market instability into next year.”
The US military said it had attacked and destroyed 16 Iranian mine laying vessels near the Strait of Hormuz, amid reports that Iran has begun placing explosive devices in the strategically vital waterway.
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British security forces said a cargo ship in the Strait of Hormuz was hit by an “unknown projectile” overnight.
Gold prices slipped on Wednesday as investors weighed conflicting signals over the US Israel conflict with Iran, while also assessing the potential impact of rising energy prices on inflation and monetary policy.
Gold futures (GC=F) lost 0.8% to $5,198.90 a troy ounce, while spot prices slipped 0.2% to $5.184.99 at the time of writing.
The pullback comes after a period of pronounced volatility for the precious metal. Gold (GC=F) has swung sharply in recent weeks after retreating from a record high near $5,600 an ounce reached in late January.
Traders have also been navigating mixed messaging surrounding the conflict in the Middle East. US president Donald Trump said late on Monday that the war was close to ending, raising hopes of a de-escalation that could ease pressure in global commodity markets. However, military strikes between the US, Israel and Iran showed little sign of slowing by early Wednesday, extending the conflict into a twelfth consecutive day.
The prospect of disruptions to global energy supply has kept markets on edge, with investors concerned that higher oil prices could feed into broader inflation pressures. That in turn has prompted speculation that central banks could adopt a more hawkish stance on interest rates.
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Such a shift would typically weigh on gold, which does not pay interest and tends to struggle when borrowing costs rise. Those concerns have helped cap gains in the metal even as geopolitical tensions have boosted demand for traditional safe-haven assets.
Investors are also awaiting US consumer inflation data for February, which may offer further insight into the trajectory of the world’s largest economy. The figures are unlikely to capture the full impact of the recent surge in energy prices linked to the conflict.
Despite the latest dip, gold has enjoyed a strong rally this year. Bullion has climbed more than 20% since the start of 2026, repeatedly setting new record highs as investors seek protection from geopolitical and economic uncertainty.
“I think it’s very likely that we’ll see gold get to over $6,000 an ounce by the third or fourth quarter this year, probably even higher early next year,” Kavalis said.
Sterling traded little changed against major currencies on Wednesday as investors balanced weak domestic fundamentals against broader moves in global markets driven by geopolitical tensions.
The pound was muted against the dollar (GBPUSD=X), at $1.3413 and similar versus the euro (GBPEUR=X), trading at €1.1552.
The US dollar index (DX-Y.NYB), which measures the currency against a basket of six major peers, edged up to 98.92, after hitting a three-month high on Monday.
Analysts said the UK currency has been weighed down by a combination of weak economic indicators, political uncertainty and the impact of higher oil prices on the country’s external balance.
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Nick Kennedy, FX strategist at Lloyds (LLOY.L), said: “The UK fundamentals are pretty poor, but in these situations you tend to see that a shakeout is followed by a recovery as investors rebalance.”
In recent weeks, the pound has come under pressure as investors assessed subdued economic data alongside a volatile political backdrop.
Strategists at BofA Securities said domestic concerns had been overshadowed by developments in the Middle East.
“With focus squarely on the Middle East, UK domestic issues have taken a back seat,” they wrote.
However, they warned that political risks could soon return to the forefront as the country approaches local elections in May.
“With the May local elections barely two months away, we think markets are underpricing a renewed rise in domestic political uncertainty.”
In equities, the FTSE 100 (^FTSE) was lower on Wednesday morning, down 0.7% to trade at 10,334 points. For more details on market movements, check our live coverage here.
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