Conflict reignites in the Middle East, oil prices surge over 1.5%! Inventories decline for the seventh consecutive week.
2026-06-03 14:07:46
International oil prices rose more than 1.5% in Asian trading on Wednesday (June 3). Brent crude futures are currently trading around $97.40 per barrel; WTI crude futures have risen above $95 per barrel. Both benchmark crudes closed at one-week highs the previous day, continuing their recent strong performance.
Just as oil prices continued their strong performance, explosive news emerged from the Middle East geopolitical situation. From late night on June 2nd to early morning on June 3rd, the military standoff between the US and Iran escalated sharply, with both sides engaging in combat on multiple fronts, affecting several Gulf countries.
According to a statement from Iran's Islamic Revolutionary Guard Corps (IRGC), the operation was retaliation for a U.S. military action. The IRGC stated that on the evening of September 2nd, the U.S. military attacked an Iranian-related oil tanker near the Strait of Hormuz, followed by an airstrike on a IRGC communications station on Qeshm Island. In response, the IRGC's Aerospace Force used missiles and drones to strike the headquarters of the U.S. Fifth Fleet in Bahrain and a U.S. air base in a Middle Eastern country.
The U.S. Central Command offered a completely different version. The U.S. stated that Iran launched multiple ballistic missiles at neighboring countries, but all missiles missed their targets—two missiles aimed at Kuwait either crashed or disintegrated en route, and three missiles aimed at Bahrain were successfully intercepted by U.S. and Bahraini air defense forces. In addition, the U.S. military also shot down three one-way attack drones launched by Iran.
The U.S. military subsequently conducted a "self-defense" airstrike on an Iranian military ground control post on Qeshm Island near the Strait of Hormuz. Central Command strongly denied Iran's claim on social media that it had struck the Fifth Fleet headquarters, responding with "FALSE" in all capital letters, stating that all Iranian attacks against U.S. forces had failed.
The conflict quickly spread throughout the Gulf region. Air raid sirens sounded nationwide in Kuwait, with the military stating it was intercepting "hostile" missiles and drones. Sirens also sounded in Bahrain. Airports in Bahrain, Kuwait, and the UAE have suspended operations due to the airstrikes.
The market is awaiting the latest news on the US-Iran negotiations, but investors are faced with a mixed picture of truth and falsehood. US President Trump denied that the negotiations had broken down, saying that the two sides had been communicating "four days ago, three days ago, two days ago, one day ago, and today"; Secretary of State Rubio also said that an agreement "could be reached today, tomorrow, or next week."
However, Iran offered a different account. According to Iranian media citing sources close to the negotiating team, information exchange between the two sides had been suspended for several days, with the last Iranian message relating to the situation in Lebanon. The Iranian Foreign Ministry stated that the United States' "new and contradictory demands" had prolonged the negotiation process.
The core obstacle to the negotiations has not been eliminated. Reports indicate that Iran insists the US lift sanctions and unfreeze its assets first, while the US is linking the asset release to a final nuclear agreement. Meanwhile, Iran is reviewing a text of an agreement aimed at a ceasefire with the US, but parliament has emphasized that it will not accept any agreement that fails to guarantee the rights of the Iranian people.
With both sides offering conflicting accounts and a mix of truth and falsehood, the market is struggling to determine the true prospects for a diplomatic breakthrough. Behind the negotiating table, the military standoff continues—Iran maintains its "highest level of alert," and US aircraft carriers continue their maritime blockade mission in the Gulf.
In early June, the Oman Maritime Security Centre issued a navigation warning, stating that an object resembling a floating mine had been spotted in Omani territorial waters near the Strait of Hormuz, and urged crew members and merchant ships to exercise extreme caution when navigating the area.
The chief safety officer of the Baltic International Maritime Council warned that the threat of mines is "particularly worrying," and ship owners will likely need solid evidence that waterways are safe before traffic can return to near-normal levels.
A joint statement from the shipping industry warned that navigation safety issues could persist long-term, even after a ceasefire or political agreement.
On the supply side, market sources cited data released by the American Petroleum Institute on Tuesday, saying that U.S. crude oil inventories fell for the seventh consecutive week last week, while gasoline inventories rose.
Sources indicated that crude oil inventories plummeted by 6.8 million barrels in the week ending May 29, a drop far exceeding market expectations of 3.6 million barrels and significantly higher than the previous week's decrease of 2.8 million barrels. API data also showed that U.S. strategic petroleum reserves continued to be released during the same period, decreasing by 8 million barrels weekly, bringing total reserves to 357 million barrels, the lowest level since January 2024.
The continued acceleration of inventory reduction further confirms the tightening supply situation, providing solid support for oil prices. At a deeper level, the rapid depletion of inventories reflects a supply-demand mismatch caused by global buyers being forced to turn to US crude oil after the closure of the Strait of Hormuz, and also exposes the fragility of the market's buffer mechanism.
It's worth noting that while crude oil inventories declined sharply, gasoline inventories unexpectedly increased by 3.5 million barrels. This suggests that high oil prices have begun to suppress end-user consumption, and refinery demand has cooled somewhat. However, overall, given that the supply gap is unlikely to be bridged in the short term, the continued decline in commercial inventories remains a significant factor supporting oil prices.
At 14:07 Beijing time on June 3, US crude oil futures were trading at $95.32 per barrel.
Geopolitical developments: Iran launches missiles, US military strikes.
Just as oil prices continued their strong performance, explosive news emerged from the Middle East geopolitical situation. From late night on June 2nd to early morning on June 3rd, the military standoff between the US and Iran escalated sharply, with both sides engaging in combat on multiple fronts, affecting several Gulf countries.
According to a statement from Iran's Islamic Revolutionary Guard Corps (IRGC), the operation was retaliation for a U.S. military action. The IRGC stated that on the evening of September 2nd, the U.S. military attacked an Iranian-related oil tanker near the Strait of Hormuz, followed by an airstrike on a IRGC communications station on Qeshm Island. In response, the IRGC's Aerospace Force used missiles and drones to strike the headquarters of the U.S. Fifth Fleet in Bahrain and a U.S. air base in a Middle Eastern country.
The U.S. Central Command offered a completely different version. The U.S. stated that Iran launched multiple ballistic missiles at neighboring countries, but all missiles missed their targets—two missiles aimed at Kuwait either crashed or disintegrated en route, and three missiles aimed at Bahrain were successfully intercepted by U.S. and Bahraini air defense forces. In addition, the U.S. military also shot down three one-way attack drones launched by Iran.
The U.S. military subsequently conducted a "self-defense" airstrike on an Iranian military ground control post on Qeshm Island near the Strait of Hormuz. Central Command strongly denied Iran's claim on social media that it had struck the Fifth Fleet headquarters, responding with "FALSE" in all capital letters, stating that all Iranian attacks against U.S. forces had failed.
The conflict quickly spread throughout the Gulf region. Air raid sirens sounded nationwide in Kuwait, with the military stating it was intercepting "hostile" missiles and drones. Sirens also sounded in Bahrain. Airports in Bahrain, Kuwait, and the UAE have suspended operations due to the airstrikes.
Negotiation Progress: A Mix of True and False Information, Uncertain Future
The market is awaiting the latest news on the US-Iran negotiations, but investors are faced with a mixed picture of truth and falsehood. US President Trump denied that the negotiations had broken down, saying that the two sides had been communicating "four days ago, three days ago, two days ago, one day ago, and today"; Secretary of State Rubio also said that an agreement "could be reached today, tomorrow, or next week."
However, Iran offered a different account. According to Iranian media citing sources close to the negotiating team, information exchange between the two sides had been suspended for several days, with the last Iranian message relating to the situation in Lebanon. The Iranian Foreign Ministry stated that the United States' "new and contradictory demands" had prolonged the negotiation process.
The core obstacle to the negotiations has not been eliminated. Reports indicate that Iran insists the US lift sanctions and unfreeze its assets first, while the US is linking the asset release to a final nuclear agreement. Meanwhile, Iran is reviewing a text of an agreement aimed at a ceasefire with the US, but parliament has emphasized that it will not accept any agreement that fails to guarantee the rights of the Iranian people.
With both sides offering conflicting accounts and a mix of truth and falsehood, the market is struggling to determine the true prospects for a diplomatic breakthrough. Behind the negotiating table, the military standoff continues—Iran maintains its "highest level of alert," and US aircraft carriers continue their maritime blockade mission in the Gulf.
Strait of Hormuz: Iran lays mines, making navigation more difficult.
In early June, the Oman Maritime Security Centre issued a navigation warning, stating that an object resembling a floating mine had been spotted in Omani territorial waters near the Strait of Hormuz, and urged crew members and merchant ships to exercise extreme caution when navigating the area.
The chief safety officer of the Baltic International Maritime Council warned that the threat of mines is "particularly worrying," and ship owners will likely need solid evidence that waterways are safe before traffic can return to near-normal levels.
A joint statement from the shipping industry warned that navigation safety issues could persist long-term, even after a ceasefire or political agreement.
Inventory data: API data shows crude oil inventories have fallen for seven consecutive weeks.
On the supply side, market sources cited data released by the American Petroleum Institute on Tuesday, saying that U.S. crude oil inventories fell for the seventh consecutive week last week, while gasoline inventories rose.
Sources indicated that crude oil inventories plummeted by 6.8 million barrels in the week ending May 29, a drop far exceeding market expectations of 3.6 million barrels and significantly higher than the previous week's decrease of 2.8 million barrels. API data also showed that U.S. strategic petroleum reserves continued to be released during the same period, decreasing by 8 million barrels weekly, bringing total reserves to 357 million barrels, the lowest level since January 2024.
The continued acceleration of inventory reduction further confirms the tightening supply situation, providing solid support for oil prices. At a deeper level, the rapid depletion of inventories reflects a supply-demand mismatch caused by global buyers being forced to turn to US crude oil after the closure of the Strait of Hormuz, and also exposes the fragility of the market's buffer mechanism.
It's worth noting that while crude oil inventories declined sharply, gasoline inventories unexpectedly increased by 3.5 million barrels. This suggests that high oil prices have begun to suppress end-user consumption, and refinery demand has cooled somewhat. However, overall, given that the supply gap is unlikely to be bridged in the short term, the continued decline in commercial inventories remains a significant factor supporting oil prices.
At 14:07 Beijing time on June 3, US crude oil futures were trading at $95.32 per barrel.
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