Key Takeaways
- Brent crude futures fell to $84.95 a barrel, while US West Texas Intermediate dropped to $79.45.
- US strikes on Iranian military installations raised fears of supply disruptions in the Strait of Hormuz.
- Analysts caution that renewed hostilities could lead to higher oil prices if tensions escalate.
Oil prices turned lower on Thursday as traders took profits and evaluated the risks from a new wave of US strikes on Iranian military installations, which fuelled fears of renewed full-scale conflict and supply disruptions in the Strait of Hormuz. The United States struck Iran’s coastal defences and missile sites on Wednesday after reimposing a naval blockade of its ports.
Brent crude futures slipped 24 cents, or 0.28%, to $84.95 a barrel as of 0435 GMT, while US West Texas Intermediate futures fell 15 cents, or 0.19%, to $79.45 a barrel. Both contracts remained close to one-month highs after initially rising for a fourth straight session.
Phillip Nova senior market analyst Priyanka Sachdeva stated that 'Geopolitical risks remain firmly supportive for oil, but after a strong rally, traders are adopting a wait-and-watch approach.' The focus has shifted from the threat itself to whether there is any tangible disruption to oil flows and how both the US and Iran choose to respond in the coming days.
Fewer vessels passed through the Strait of Hormuz on Wednesday, the first day after the US reimposed its naval blockade on Iran. Seven crossed on Wednesday, down from 13 the previous day. US aircraft fired on a ship that tried to break Iran's ports blockade: US military officials reported this action.
Hostilities between Iran and the US reignited last week, fraying an already fragile truce reached in June after several months of fighting. While mediation efforts by neighbouring countries continue and the consensus view is that a full-scale war is unlikely, WTI could still rise to $85–$87 depending on how the conflict develops, according to Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment.
Analysts say Iran has signalled it may use its Houthi allies in Yemen to shut the Bab el-Mandeb gateway to the Red Sea, opening a new front against Washington and putting a second of the world’s most vital energy arteries at risk. Reuters also reported on Wednesday that US officials said the strikes on Iran could pave the way for 'more complex' operations against the country, adding to market jitters.
Goldman Sachs said Brent could exceed $110 in the fourth quarter if the Gulf export recovery continues to stall, but could fall into the $60s by year-end if tensions ease and production recovers faster than expected. ING analysts cautioned that supply disruptions are flaring back up at a time when US commercial oil inventories are at the lowest levels since 2022, and the lowest levels for the season since 2018.
The concern is that renewed oil supply disruptions come amid the large inventory drawdowns through the second quarter, leaving the market vulnerable to further price increases. As traders continue to assess the situation, the impact on global energy markets remains a key focus.
Geopolitical risks remain firmly supportive for oil, but after a strong rally, traders are adopting a wait-and-watch approach.
Phillip Nova senior market analyst Priyanka Sachdeva
While mediation efforts by neighbouring countries continue and the consensus view is that a full-scale war is unlikely, WTI could still rise to $85–$87 depending on how the conflict develops.
Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment
