Morning Highlights: Oil Jumps on US-Iranian tension, Gunboat Threats Ahead of Friday Talks; U.S. Approves 1M BPD Texas Export Terminal

Wednesday, February 4, 2026

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MARKET SNAPSHOT

Oil rallied as military confrontations between the U.S. and Iran rekindled war fears ahead of Friday's nuclear talks. Brent rose $0.27 to $67.60/bbl, while WTI gained $0.37 to $63.58/bbl as of 6:00 EST.

Both benchmarks have seesawed this week between news of talks to de-escalate U.S.-Iran tensions and heightened fears of potential disruption to oil flows through the Strait of Hormuz.

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TOP DEVELOPMENTS

Iranian Drone Shot Down, Gunboats Threaten U.S. Tanker

Incident #1 - Arabian Sea: Tuesday, the U.S. military shot down an Iranian drone that "aggressively" approached a U.S. aircraft carrier in the Arabian Sea.

Incident #2 - Strait of Hormuz: A group of Iranian gunboats approached a U.S.-flagged tanker north of Oman, maritime sources and a security consultancy said. U.S. Central Command said Iran's Islamic Revolutionary Guard Corps forces approached at speed and threatened to board and seize the vessel.

Maritime risk management group Vanguard said the Iranian boats ordered the tanker to stop its engine and prepare to be boarded. Instead, the tanker sped up and continued its voyage.

These incidents occurring before Friday's scheduled talks in Oman, raise the stakes significantly. OPEC members Saudi Arabia, Iran, UAE, Kuwait, and Iraq export most of their crude via the Strait of Hormuz, mainly to Asia. Any disruption to this chokepoint would affect roughly 20 million bpd of oil flows.

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FRIDAY TALKS: IRAN CHANGES VENUE, LIMITS SCOPE

Venue Change: The U.S. and Iran are due to hold talks in Oman on Friday after Tehran requested a change of venue from Turkey to limit negotiations to its nuclear program, a regional official said.

Iran's Red Lines: Iran wanted the meeting in Oman (where previous nuclear talks occurred) to avoid expansion to other issues like ballistic missiles. Tehran has said it will not make concessions on its "formidable ballistic missile programme" - one of the Middle East's biggest - calling that a red line.

Tehran warned it will unleash missiles to defend the Islamic Republic if its security is threatened. Iranian sources said the clerical rulers see the ballistic missile program, rather than uranium enrichment, as the bigger obstacle.

Trump's Three Conditions: Trump demanded for resuming talks:

1. Zero enrichment of uranium in Iran

2. Limits on Tehran's ballistic missile program

3. End to support for regional proxies

Iran has long said all three demands are unacceptable infringements of sovereignty. However, since U.S. strikes in June, Tehran has said its uranium enrichment work has stopped (claiming it was for peaceful, not military purposes).

The venue change and scope limitations suggest Iran is trying to control the narrative and avoid broader discussions. However, Tuesday's aggressive military actions (drone, gunboats) combined with Trump's three firm conditions create a volatile setup for Friday's talks. The regional official noted Iran stressed from the beginning it would only discuss nuclear programs, while Washington wanted other issues on the agenda.

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U.S. CRUDE INVENTORIES: MASSIVE 11+ MILLION BARREL DRAW

API Shocker: Oil prices found support from industry data showing a sharp drop in U.S. crude stockpiles. Inventories fell by more than 11 million barrels last week, sources said citing American Petroleum Institute figures.

Official EIA data is due at 10:30 EST today.

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U.S. APPROVES TEXAS GULFLINK: 1 MILLION BPD DEEPWATER EXPORT TERMINAL

Major Infrastructure Approval: The U.S. Transportation Department Tuesday approved a license for Sentinel Midstream's Texas GulfLink deepwater oil export project off the Texas coast, capable of exporting up to 1 million barrels per day.

Project Details:

• Location: 26.6 nautical miles off Brazoria County, Texas

• Capacity: 1 million bpd crude oil exports

• Capability: Can fully load Very Large Crude Carriers (VLCCs/supertankers)

Transportation Secretary Sean Duffy called it part of the Trump administration's effort to boost U.S. oil industry production and exports.

Current Limitation: Only one U.S. port - Louisiana Offshore Oil Port (LOOP) - can currently fully load supertankers. Other facilities can only partially load due to draft restrictions, requiring smaller ships to ferry crude to larger vessels.

Benefits: "The Texas project will enhance the U.S.' ability to accommodate VLCCs, which will significantly reduce vessel congestion, improving navigational safety. The process is faster, cheaper, and more efficient than transferring cargo in nearshore waters," Duffy said.

Context: U.S. crude exports rose to 4.4 million bpd in September 2024, the highest since February 2024. Adding 1 million bpd of efficient deepwater export capacity represents a roughly 25% expansion of peak export capability and removes infrastructure bottlenecks that have occasionally constrained U.S. crude exports.

Timing: Secretary Duffy said last month MARAD would take over and streamline the deepwater port licensing process, accelerating approvals.

Bearish Long-Term Implication: This infrastructure addition ensures U.S. shale production can reach global markets efficiently, supporting Goldman's thesis that U.S. supply growth will pressure prices. The approval demonstrates Trump's commitment to fossil fuel expansion regardless of global oversupply concerns.

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ADDITIONAL SUPPORT FACTORS

India-U.S. Trade Deal: Tuesday, oil was buoyed by the U.S.-India trade agreement that raised hopes of stronger global energy demand (though we've noted this is bearish for Russian crude as India abandons those purchases).

Russian-Ukraine Conflict: Continued Russian attacks on Ukraine added concerns that Moscow's oil would remain under sanctions longer.

Equity Selloff: A broader selloff of equities, which often move in tandem with oil prices, put a lid on today's gains.

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BOTTOM LINE

Oil is bouncing as Iranian military aggression (drone shootdown, gunboat threats to U.S. tanker) ahead of Friday's Oman talks recreates war premium that evaporated Monday. The seesawing this week perfectly captures the market's schizophrenia: Monday's 5% plunge on "seriously talking" dialogue, Tuesday's grind lower, Wednesday's rally on military confrontations. The 11+ million barrel U.S. crude inventory draw (versus some expectations of a build) provides fundamental support and explains some of the rally beyond geopolitics. However, Friday's talks in Oman are the critical catalyst. Iran limiting scope to nuclear program only and declaring ballistic missiles a "red line" while Trump demands zero enrichment, missile limits, and end to proxy support creates a difficult negotiating environment. Tuesday's aggressive Iranian military actions (drone, gunboats) one day before talks suggest Tehran is demonstrating resolve or potentially sabotaging dialogue. The Strait of Hormuz incidents are more serious than previous rhetoric given actual attempts to seize a U.S.-flagged tanker. The Texas GulfLink 1M bpd export terminal approval is long-term bearish, ensuring U.S. supply (currently at record levels) can efficiently reach global markets and adding to oversupply. Brent at $67.60 and WTI at $63.58 represent modest recovery from this week's lows ($65.19 and $61.12) but remain well below last week's $70+ peaks driven by regime change strike threats. Friday's talks are binary: successful dialogue could send prices toward $65 or lower, while breakdown could recreate the $70+ war premium. The 11M barrel inventory draw is a genuine bullish surprise that may reflect Winter Storm Fern recovery exports or strong refinery demand. Watch for EIA confirmation at 3:30 PM GMT. The fundamental anchors (IEA 4.25M bpd Q1 surplus, Goldman $54 Q4, India abandoning Russian crude) remain, but near-term trading will be dominated by Friday's Oman talks outcome. Market positioning suggests traders are cautiously rebuilding Iran risk premium but not fully committing given Trump's track record of de-escalation.