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Oil Steady as Middle East Worries Offset US Crude Stock Buildup

A pump jack lifts oil out of a well during a sandstorm in Midland, Texas, US, April 13, 2018. Picture taken April 13, 2018. (Reuters)
A pump jack lifts oil out of a well during a sandstorm in Midland, Texas, US, April 13, 2018. Picture taken April 13, 2018. (Reuters)
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Oil Steady as Middle East Worries Offset US Crude Stock Buildup

A pump jack lifts oil out of a well during a sandstorm in Midland, Texas, US, April 13, 2018. Picture taken April 13, 2018. (Reuters)
A pump jack lifts oil out of a well during a sandstorm in Midland, Texas, US, April 13, 2018. Picture taken April 13, 2018. (Reuters)

Oil prices were little changed on Wednesday after two straight days of losses, as the deadlock in Gaza ceasefire talks renewed uncertainty about the security of supplies from the Middle East, offsetting a bigger-than-expected build in US crude inventories.

Brent crude futures were up marginally at $89.49 per barrel at 0330 GMT, while US West Texas Intermediate (WTI) crude futures rose 8 cents to $85.31.

Prices for both benchmarks remain down around 1.8% on the end of last week despite geopolitical tensions in the Middle East triggered by the prospect of Israel's war in Gaza lasting longer, and drawing in more countries.

"Some of the heat has come out of rally in crude oil in the early part of this week on hopes of a ceasefire in Gaza and higher US inventories," said Tony Sycamore, a market analyst at IG in Singapore.

Hamas said on Tuesday that an Israeli proposal on a ceasefire in their war in Gaza did not meet the demands of Palestinian militant factions, but it would study the offer further and deliver its response to mediators.

If the conflict continues, it risks the involvement of other countries in the region, particularly Hamas backer Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC).

Meanwhile, US crude stocks climbed last week by 3.03 million barrels, according to market sources citing American Petroleum Institute figures. Analysts had estimated that stocks would rise by about 2.4 million barrels.

Official US government inventory data is due at 1430 GMT.

However, all the risks remain to the upside, IG's Sycamore said.

"Anything from a cooler-than-expected US CPI tonight to another Ukrainian drone attack on Russian oil infrastructure to a response from Iran after Israel killed two of its generals in Syria last week is more than capable of re-igniting the uptrend," he added.

Separately, the government raised its forecast for US crude oil output, expecting an increase of 280,000 bpd to 13.21 million bpd in 2024, up 20,000 bpd from an earlier forecast from the US Energy Information Administration (EIA).

However, EIA said it expects Brent crude prices to average $88.55 a barrel in 2024, up from a previous forecast of $87 a barrel.

On Tuesday, both Brent and WTI fell more than 1%, as Israel-Hamas ceasefire discussions in Cairo continued.

Türkiye said it would restrict exports of various products, including jet fuel, to Israel until there is a ceasefire. Israel said it would respond with its own curbs.

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Israel-Iran Conflict Disrupts Air Travel in the Region

Flight information display screen shows updates about cancelled flights, due to schedule disruptions stemming from the Iran-Israel conflict, at the Beirut-Rafik Hariri International Airport, Lebanon June 16, 2025. (Reuters)
Flight information display screen shows updates about cancelled flights, due to schedule disruptions stemming from the Iran-Israel conflict, at the Beirut-Rafik Hariri International Airport, Lebanon June 16, 2025. (Reuters)
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Israel-Iran Conflict Disrupts Air Travel in the Region

Flight information display screen shows updates about cancelled flights, due to schedule disruptions stemming from the Iran-Israel conflict, at the Beirut-Rafik Hariri International Airport, Lebanon June 16, 2025. (Reuters)
Flight information display screen shows updates about cancelled flights, due to schedule disruptions stemming from the Iran-Israel conflict, at the Beirut-Rafik Hariri International Airport, Lebanon June 16, 2025. (Reuters)

The escalating military conflict between Israel and Iran is creating mounting challenges for Middle Eastern airlines, including airspace closures and rerouted flight paths, all of which are driving up operational costs.

While Gulf carriers are relying on alternative routes - albeit more expensive ones - private airlines in neighboring countries face the risk of exiting the market altogether if the crisis persists.

Countries geographically close to the conflict, such as Iraq, Lebanon, and Jordan, are increasingly concerned about the conflict’s deepening impact on the civil aviation sector, which represents one of the most sensitive branches of their economies. The threat is no longer confined to security concerns alone, but is now hitting the economic core of these nations.

Dr. Hussein Al-Zahrani, an aviation investor, told Asharq Al-Awsat that countries geographically tied to the Iran-Israel conflict are already facing direct complications in the aviation sector. These include airport closures and rerouted flights, such as the diversion of Jordanian planes to Egypt’s Cairo and Sharm El Sheikh, or grounding aircraft entirely.

Al-Zahrani noted that national carriers in these countries, particularly state-owned airlines, are more likely to receive government support to help them weather the storm. However, the limited number of private airlines operating in these regions may not survive a prolonged crisis.

Iraq has approximately five carriers, Lebanon one, Syria two (one of which is government-owned), and Jordan three; all of which could suffer significantly if the conflict drags on.

In contrast, Gulf airlines have contingency plans in place, Al-Zahrani said, although they are not immune to the repercussions.

Increased flight distances and restricted airspace will present logistical and financial burdens, though Gulf carriers are more resilient and often absorb the extra costs themselves. In many cases, rerouting results in only minor extensions - around 20 minutes - which allows airlines to maintain stable pricing.

He cited exceptions, such as some northern-bound Kuwaiti flights to Europe that typically rely on Iraqi airspace. These will now need to reroute via Saudi airspace, then over the Mediterranean to reach Europe, significantly increasing flight durations and operating expenses.

Al-Zahrani also pointed out that many transcontinental flights between East and West, which pass over Saudi and Iraqi airspace, will be disrupted if closures in conflict zones persist. This may force airlines to reschedule, reroute, or even suspend certain long-haul routes if they become economically unfeasible.

Aviation-sector companies are considered foundational contributors to national budgets, particularly in countries where the industry plays a major economic role. According to Al-Zahrani, these entities are typically the first to suffer in the event of military conflicts, especially as oil prices rise and long-haul operations become increasingly expensive.

Observers warn that if Iran were to close the Strait of Hormuz - a vital maritime corridor connecting the Arabian Gulf to the Gulf of Oman and the Arabian Sea - it would further heighten concerns for both maritime and air transportation companies, given the anticipated spike in insurance costs and risk premiums should the crisis continue.

Economic analyst Marwan Al-Sharif told Asharq Al-Awsat that airlines may be able to navigate the crisis if it remains short-lived, especially those operating in proximity to the warring parties. However, if the conflict drags on, the resulting losses could grow more severe, weakening the financial viability of many carriers amid rising fuel costs, airspace restrictions, and surging insurance rates.