Oil prices fell on Thursday, as traders took profits and assessed the risks of a new wave of US strikes on Iranian military facilities, which heightened fears of a full-scale conflict resumption and supply disruptions in the Strait of Hormuz, reports UNN citing Reuters.
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On Wednesday, the United States struck Iran's coastal defense and missile launchers after reinstating a naval blockade of its ports, while Iran threatened to halt energy exports from the region, stating it is waging an "existential war" with America.
US has struck new blows against Iran amid the threat of escalation to shipping15.07.26, 16:51
After initially rising for a fourth consecutive session, Brent crude futures fell by 24 cents, or 0.28%, to $84.95 per barrel as of 04:35 GMT (07:35 Kyiv time), while US West Texas Intermediate crude futures dropped by 15.7% per barrel. Earlier in the session, Brent crude rose nearly a dollar, and both contracts remained near monthly highs.
"Geopolitical risks continue to provide significant support to the oil industry, but after a strong rally, traders have adopted a wait-and-see stance," said Priyanka Sachdeva, senior market analyst at Phillip Nova. "Attention has shifted from the threat itself to the question of whether there will be any tangible disruptions in oil supplies and how the US and Iran will choose to respond in the coming days."
Oil prices rose this week, as the attacks exacerbated supply disruptions through the Strait of Hormuz, through which about a fifth of the world's oil and liquefied natural gas trade passed before the war.
On Wednesday, the first day after the US reinstated its naval blockade of Iran, fewer vessels passed through the Strait of Hormuz. Seven ships crossed it on Wednesday, compared to 13 a day earlier. Last week, hostility between Iran and the US escalated, undermining an already fragile truce reached in June after several months of hostilities.
"While mediation efforts by neighboring countries continue, and the general consensus is that a full-scale war is unlikely, WTI crude prices could rise to $85-87 depending on the conflict's development," said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment.
Analysts say Iran has signaled it could use its Houthi allies in Yemen to block the Bab el-Mandeb Strait leading to the Red Sea, opening a new front against Washington and threatening the world's second most important energy artery.
Iran may close the Bab el-Mandeb Strait and create Hormuz-2 - Reuters15.07.26, 01:38
Reuters also reported on Wednesday that US officials said strikes on Iran could pave the way for "more complex" operations against the country, increasing market volatility.
Goldman Sachs said Brent crude prices could exceed $110 in the fourth quarter if the recovery of exports from the Persian Gulf continues to slow, but could also fall to $60 by year-end if tensions ease and production recovers faster than expected.
ING analysts warned in a note that supply disruptions are flaring up again at a time when US commercial crude inventories are at their lowest since 2022 and at their lowest seasonally since 2018.
"The concern is that the resurgence of oil supply disruptions is occurring against a backdrop of significant inventory drawdowns in the second quarter, making the market more vulnerable," the analysts pointed out.