Rising fuel costs, with U.S. diesel above $5 per gallon, are adding to inflation concerns ahead of the Federal Reserve’s policy meeting on Wednesday.
- Iraq’s move to resume exports via Turkey, bypassing the Strait of Hormuz, eased immediate supply fears.
- However, U.S. strikes near Hormuz and Iran’s retaliation threats continue to cloud the outlook.
- Analysts said oil is likely to stay above $100 in the near term, warning that supply disruptions could evolve into longer-lasting shortages.
Oil stocks fell in premarket trading on Wednesday, tracking a pullback in crude prices after a fresh geopolitical twist eased some immediate supply fears even as broader risks remained elevated.
Shares of United States Oil Fund (USO) slipped 2%, Indonesia Energy (INDO) fell 6%, Battalion Oil (BATL) plunged 21%, Trio Petroleum (TPET) shed 16% and EON Resources (EONR) lost declined 18% in premarket trading after crude retreated, with Brent slipping below $101 per barrel and West Texas Intermediate hovering near $92.
Oil Slips As Iraq Bypasses Strait Of Hormuz
The drop in oil came after Iraq signed an agreement with Kurdistan to resume exports via a pipeline to Turkey’s Mediterranean port of Ceyhan, creating a route that bypasses the Strait of Hormuz, a key global chokepoint.
The restart of Iraqi flows through Turkey offered partial relief to markets rattled by disruptions in the Gulf. At the same time, the U.S. intensified efforts to reopen the Strait of Hormuz, saying it had struck Iranian anti-ship missile sites near the waterway.
The moves come amid escalating tensions in the region following Iran’s confirmation of the death of Ali Larijani, the country’s security chief, which triggered threats of retaliation and added uncertainty to global energy markets. Meanwhile, Iraq’s output has fallen to about 1.4 million barrels per day, roughly a third of pre-disruption levels.
Analysts See Oil Holding Above $100
Despite the near-term pullback, analysts say the broader trend for oil prices remains firmly supported by geopolitical risks. OCBC said crude is likely to stay above $100 per barrel in the near term, citing little de-escalation in the U.S.-Iran conflict and continued constraints on flows through the Strait of Hormuz, Investing noted.
The firm expects Brent to average around $100 through mid-2026, higher than earlier forecasts near $70, before easing toward $70 by early 2027 as disruptions gradually unwind. “Persistent shipping paralysis is forcing Gulf producers into output shut-ins, raising the risk that temporary disruptions evolve into longer-lasting supply losses,” OCBC said. Even with mitigating measures such as alternative pipelines and strategic reserve releases, the bank warned that markets could still face a sizable supply gap if disruptions persist.
Rising Fuel Costs Add To Inflation Concerns
Phillip Nova said crude markets are being driven by “headline-driven volatility, steep intraday fluctuations, and a foundation of disrupted supplies,” as well as bottlenecks across key export routes. The brokerage added that intermittent loading delays at Gulf terminals could further tighten near-term availability, keeping prices sensitive to geopolitical developments.
The broader impact of higher energy prices is already feeding into inflation concerns. U.S. diesel prices have surged past $5 per gallon, raising transportation and supply chain costs that central banks will likely track. Federal Reserve officials are set to meet on Wednesday to decide on interest rates, with no immediate change expected.
Economist Robin Brooks said on X that the current price shock has pushed Brent roughly 42% higher compared to pre-war levels, though he noted markets are not yet pricing in panic scenarios seen in past crises.
How Did Stocktwits Users React?
On Stocktwits, retail sentiment for USO and INDO was ‘bullish’, with message volume ‘high’ for USO and ‘low’ for INDO, while BATL and TPET saw ‘bearish’ sentiment amid ‘low’ message volume. EONR stood out with ‘extremely bullish’ sentiment on ‘extremely high’ message volume.
Over the past year, USO is up 63%, INDO rose 41%, BATL has surged 860% and EONR has gained 111%, while TPET is down 28%.
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