West Texas Intermediate (WTI), the U.S. crude oil benchmark, is trading around $67.20 per barrel during Thursday’s early Asian session, supported by ongoing geopolitical tensions in the Middle East. However, the Federal Reserve’s (Fed) decision to hold interest rates steady is limiting further upside for crude prices.
Geopolitical Risks Drive Oil Market Volatility
The escalation of conflict in the Middle East has heightened concerns over global energy supply chains. The Israeli military has resumed ground operations in central and southern Gaza, while U.S. President Donald Trump has threatened continued military action against Yemen’s Houthi rebels. Trump also warned Iran of repercussions for any attacks linked to the Houthis, whose recent actions have disrupted shipping routes in the Red Sea.
These disruptions have forced oil and gas shipments to take longer routes, increasing transportation costs and providing upward pressure on WTI prices. “Traders are being forced to refocus on Mideast geopolitical risks as Israel and the United States launch attacks on Gaza and Yemen, respectively,” said Clay Seigle, senior fellow for energy security at the Center for Strategic and International Studies.
Crude Stockpiles Rise More Than Expected
Oil prices also face pressure from rising crude inventories. The U.S. Energy Information Administration (EIA) reported that crude stockpiles increased by 1.745 million barrels for the week ending March 14, surpassing the market consensus of a 1.17 million-barrel build. This follows a previous week’s increase of 1.448 million barrels, signaling softer demand.
Fed Policy and Economic Growth Concerns Weigh on Oil
As expected, the Fed maintained interest rates at 4.25%-4.50% during its March meeting. However, policymakers reaffirmed their forecast for a half-percentage-point rate cut by year-end, citing slowing economic growth and moderating inflation.
While lower borrowing costs could support future energy demand, current concerns about weaker economic activity are dampening WTI’s rally. Traders remain cautious, balancing geopolitical risks with the Fed’s outlook and rising crude stockpiles.
