Oil prices retreated on Thursday, pulling back from a volatile session a day earlier, as traders tried to gauge how far the latest flare-up between the United States and Iran might go and how much of the world’s crude supply could get caught in the crossfire.
Brent crude futures shed 56 cents, or 0.6%, to trade at $95.07 a barrel by 07:52 GMT, while U.S. West Texas Intermediate slipped 50 cents, also down 0.6%, to $90.51.
The pullback snapped a three-session winning streak for both benchmarks, suggesting some of the risk premium built into prices this week is now being unwound, even as the underlying conflict shows no sign of cooling.
Iran’s health ministry reported that Tuesday night’s U.S. strikes killed eight people and wounded 108 across the country. The Iranian Red Crescent said a strike near the coast of the Strait of Hormuz hit a wedding ceremony, killing four and injuring 67, an image likely to sharpen already fraught diplomatic tensions in the region.
The exchange marks the most significant round of fighting between Washington and Tehran since July, thrusting a conflict now in its seventh month back into the spotlight for energy markets that had, in recent weeks, grown almost accustomed to the low hum of an intermittent war.
That complacency was tested Wednesday, when Brent and WTI whipsawed within a single session, swinging as high as $2 a barrel in gains before giving back as much as $1, with both benchmarks touching their strongest levels since July 24 before fading into the close.
Nowhere is the market’s anxiety more visible than in the Strait of Hormuz, the narrow waterway through which roughly a fifth of global oil supply typically flows.
Preliminary shipping data released Thursday showed just six commodity vessels transited the strait on Wednesday, down sharply from 11 the day before and well below the 10-day rolling average of around 13, a sign that shipowners are growing warier of sailing through the strait as hostilities intensify.
Adding to that caution, Iran has expanded its list of vessels it considers non-compliant, warning that ships on the list risk fines, confiscation, or detention should they attempt passage, a move that traders say is likely to further chill traffic through the corridor in the days ahead.
Even as Hormuz traffic falters, Iraq has moved to capitalize on the disruption. Two Iraqi energy officials said Wednesday that the country’s oil exports climbed to around 2.34 million barrels per day in August, up sharply from roughly 1.35 million bpd in July.
Officials expect September volumes to rise further still, aided by steep discounts and what they described as Iranian approvals allowing Iraqi tankers to pass through the strait, an unusual wrinkle that underscores how even adversarial actors in the conflict are finding pockets of pragmatic accommodation to keep barrels moving.
The oil market’s jitters come against a shifting macroeconomic backdrop. Traders have recently ramped up bets on a Federal Reserve interest rate increase around mid-month.
This prospect could strengthen the dollar and dampen demand for dollar-denominated crude, adding another layer of crosscurrents for a market already contending with geopolitical risk.
For now, analysts say, the market’s modest pullback Thursday reflects less a resolution of the underlying risk than a pause for breath, a recalibration after a volatile session, rather than a bet that the Strait of Hormuz, or the war behind it, is out of danger.
WHAT YOU SHOULD KNOW
Oil dipped on Thursday slightly, but don’t mistake that for calm; it’s a pause, not a resolution. The real story is the Strait of Hormuz, where ship traffic has dropped by more than half in a day as the U.S.-Iran war grinds into its seventh month. As long as vessels stay wary of that chokepoint, the risk of a much sharper price spike remains very much alive.
