Oil prices retreated on Thursday, pulling back from a brief early rally, as traders tried to reconcile the mounting risk of a full-blown confrontation between Washington and Tehran with the fact that crude, for now, is still moving through the world’s most critical chokepoint.
Brent crude futures fell 58 cents, or 0.68%, to $84.37 a barrel by 08:08 GMT. U.S. West Texas Intermediate slipped a more modest 18 cents, or 0.23%, to $79.42 a barrel. Both benchmarks had briefly climbed, Brent gaining nearly $1 in early trading before easing back, though both remain perched near one-month highs, a sign that the market’s underlying nervousness has not gone away even as the day’s headline numbers point down.
That contradiction of prices dipping on the tape while the geopolitical backdrop darkens by the day has become the defining feature of trading this week. “The market is still reacting with a surprising degree of calmness,” said Ole Hvalbye, market analyst at SEB Research, in a note to clients.
Hvalbye argued that the pullback should be read less as reassurance and more as a pause: “It seems reasonable that prices could continue to climb towards $90-$95 and maybe even touch the $100 mark again,” he said, pointing to repeated disruptions around the Strait of Hormuz as the reason uncertainty over Gulf oil flows keeps building rather than fading.
The latest leg of the crisis traces back to Wednesday, when U.S. forces struck Iranian coastal defense installations and missile sites, hours after Washington reimposed a naval blockade on Iranian ports.
The strikes followed the collapse of a truce that had, only weeks earlier, offered a brief reprieve from hostilities reached in June. That ceasefire’s unraveling has revived fears among traders, diplomats, and shipping insurers alike of a return to sustained, full-scale conflict this time with the Strait of Hormuz sitting squarely in the crossfire.
Tehran’s response has been defiant. Iranian officials described the country as locked in an “existential war” with the United States and threatened to shut off additional regional energy exports in retaliation.
On Thursday, Iran went further, declaring the strait an “inviolable red line” and warning that if President Donald Trump follows through on threats to strike Iranian infrastructure, Tehran would retaliate by hitting infrastructure across the wider Gulf region a threat that, if carried out, would extend the conflict well beyond Iranian and American assets to the oil and gas facilities of neighboring Gulf states.
The stakes could scarcely be higher for energy markets. The Strait of Hormuz, the narrow waterway separating Iran from Oman and the UAE, handled roughly a fifth of global daily oil and LNG trade before the war began, a volume that makes it, by most measures, the single most consequential piece of maritime real estate in the global energy system.
Any sustained closure or even partial disruption ripples almost instantly through tanker rates, insurance premiums, and spot prices from Rotterdam to Singapore.
So far, the strait has not gone quiet, but it has gone quieter. Ship-tracking data showed just seven vessels crossed the strait on Wednesday, the first full day under the reimposed U.S. naval blockade, down sharply from 13 the day before. That halving of traffic is being read by analysts as an early signal of the caution now gripping shipowners and charterers, even as it falls well short of an outright closure.
“Markets could remain cautious as they assess immediate supply risks,” said Wael Makarem, financial markets strategist lead at Exness. “So far, despite heightened military tensions, oil tankers continue to sail through the Strait of Hormuz, although in more limited numbers.” That distinction, reduced flow rather than severed flow, is, for now, the thin line keeping oil prices in the $80s rather than the triple digits some analysts are now openly forecasting.
Compounding the uncertainty, analysts say Iran has signaled it may lean on its Houthi allies in Yemen to close the Bab el-Mandeb strait, the gateway linking the Gulf of Aden to the Red Sea and, by extension, the Suez Canal.
Such a move would open a second front in the economic dimension of the conflict, threatening a chokepoint already battered by Houthi attacks on commercial shipping in recent years, and would put two of the world’s most vital energy arteries under simultaneous strain, a scenario traders have long treated as a worst-case tail risk that now looks less remote than it did a month ago.
The conflict’s shockwaves are not confined to the Middle East. Ukraine’s Security Service said Thursday that its forces, working with the Ukrainian navy, struck two Russian “shadow fleet” tankers with naval drones in the Black Sea, a reminder that the vessels quietly moving sanctioned Russian crude to market remain a live target and that instability in one energy corridor rarely stays contained to it.
Coming the same day as the Hormuz escalation, the strike underscores how thoroughly global oil logistics from the Gulf to the Black Sea are now entangled in overlapping conflicts, each capable of moving markets independently of the other.
For now, the oil market’s message is one of watchful restraint rather than panic. Prices near one-month highs reflect a risk premium that has already been priced in; the day’s modest declines reflect uncertainty over whether that premium is enough.
Analysts broadly agree that the next moves hinge on two questions: whether tanker traffic through Hormuz continues to thin or stabilize, and whether Iran and its regional allies act on threats to widen the conflict to the Bab el-Mandeb strait or Gulf infrastructure more broadly.
Should either chokepoint see a genuine closure rather than a slowdown, the $90-$100 range analysts are now floating could arrive far faster than markets currently expect.
WHAT YOU SHOULD KNOW
Oil prices dipped on Thursday, Brent down 0.68% to $84.37 and WTI off 0.23% to $79.42 even as both hovered near one-month highs on fears of a wider U.S.-Iran war. The pullback followed U.S. strikes on Iranian coastal defenses and a reimposed naval blockade after June’s truce collapsed and Tehran vowed an “existential war” response.
Strait of Hormuz traffic fell to seven vessels Wednesday, down from 13, though shipping hasn’t stopped. Analysts warn prices could still climb toward $90-$100 if Iran follows through on threats to hit Gulf infrastructure or uses Houthi allies to shut the Bab el-Mandeb Strait.
Separately, Ukraine struck two Russian “shadow fleet” tankers in the Black Sea, underscoring how fragile global energy shipping has become on multiple fronts.
