The third week of August 2024 witnessed an unexpected rebound in Crude Oil prices, following a period of decline driven by recession fears in the United States. The market's initial reaction to the potential of a US recession was marked by a significant drop in Crude Oil prices, as investors anticipated a decrease in energy demand, hinting toward weakening of a global economic indicator and a potential increase in oil production. However, as recession fears subsided, geopolitical tensions in the Middle East heightened the market sentiments, propelling prices to new heights.

On the one hand, the Crude Oil market was impacted by the unrest in the Middle East. Consecutively, worries about an impending recession subsided which rebounded the global market sentiments on 16th August 2024 by more than 3% to settle Crude Oil with WTI at USD 77.83/barrel while Brent at USD 80.54/barrel. The escalating conflict between Iran and Israel catalysed the price surge. The deployment of a US guided-missile submarine to the region, amid concerns of Iranian attacks on Israel, signalled a potential escalation of hostilities. This heightened the risk of disruptions to oil production in the Middle East, a key source of global supply. The prospect of supply disruptions sent ripples through the market, leading to a significant increase in Crude Oil prices. Data from the American Petroleum Institute (API) further exacerbated the price rise. The API reported a substantial decline in US Crude inventories, indicating a tightening of supply and raising concerns about potential shortages. Unexpectedly, US Crude Oil inventories decreased by 3.7 million barrels, reaching 429.32 million barrels, which resulted in a bullish market trend for Crude Oil. The decline in gasoline stocks added to the pressure on prices, as it suggested a potential imbalance between supply and demand.

As per ChemAnalyst, the initial decline in Crude Oil prices due to recession fears was quickly overshadowed by the escalating tensions between Iran and Israel. The potential for disruptions to oil production in the Middle East, coupled with a tightening of supply in the United States, could escalate Crude Oil prices in September 2024. While, the International Energy Agency (IEA) maintained its 2024 global oil demand growth forecast, providing some stability to the market. However, they did slightly reduce their 2025 estimate, citing concerns about a weakened Chinese economy, a major consumer of oil. Despite this slight reduction, the overall outlook for oil demand is likely to remain positive.