Oil swings as Middle East tensions flare up with UAE-Iran spat

A pumpjack operates on March 10, 2026 near Taft, Calif. Photo by Mario Tama/Getty Images

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Oil fluctuated as traders weighed renewed tensions in the Middle East that further clouded the outlook for flows through the vital Strait of Hormuz.

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The UAE said it was cutting all economic ties with Tehran after accusing Iran of firing ballistic missiles at its territory. Brent futures traded near US$91 a barrel, paring gains after earlier spiking to a three-week high. The global crude benchmark has risen about 15 per cent over the past two weeks as the prospect of an end to the Middle East turmoil seems increasingly elusive.

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The latest escalation came after U.S. President Donald Trump insisted there were no talks ongoing with Iran to end the war that has upended energy markets. Three supertankers linked to China U-turned in the Strait of Hormuz, highlighting how risks remained elevated in the critical chokepoint. On Tuesday, the U.K. said a vessel leaving the strait was hit by a projectile, causing one casualty.

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Still, Persian Gulf producers have continued to covertly shuttle oil through Hormuz to reach global users, helping to contain prices that are far from the high levels many feared at the onset of the war if the turmoil dragged on into the summer. As a 60-day ceasefire between the U.S. and Iran expired, some traders unwound long bets to avoid getting wrong-footed by a sudden de-escalation, also helping to subdue prices.

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“A combination of the escalation between the UAE and Iran, coupled with a market increasingly pricing a ‘closed for longer scenario,’ keeps oil and refined products supported,” said Arne Lohmann Rasmussen, chief analyst at Global Risk Management.

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Fuel prices, especially diesel, have rallied much harder than oil, as the war between Russia and Ukraine has also contributed to tighter energy markets following attacks on refineries. That’s heaping cost pressure onto drivers, truckers and farmers, as well as industry.

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The margin for making diesel from crude oil in the U.S. has topped US$100 a barrel, setting all-time highs. In Europe, gasoil futures have more than doubled this year.

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In the U.S., there were fresh signs of lower oil inventories. The American Petroleum Institute reported a modest draw in nationwide crude holdings, including at the key distribution hub in Cushing, Oklahoma. Stockpiles of distillates — a category that includes diesel — were also seen falling. Official data are due later Wednesday.

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With assistance from Rong Wei Neo and Mia Gindis

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