Oil markets tumbled on Thursday as traders reassessed fresh U.S. strikes on Iran, a move that has jeopardized fragile ceasefire talks and cast doubt on a full reopening of the Strait of Hormuz, the world’s most vital oil chokepoint.
By 07:49 GMT, Brent crude futures had shed $1.03, or 1.32%, to trade at $76.99 a barrel, while U.S. West Texas Intermediate crude slipped 88 cents, or 1.2%, to $72.64.
The declines mark a sharp reversal from Wednesday, when both benchmarks touched their highest levels since June 22, buoyed by fears of supply disruption rather than confidence in supply growth.
The whiplash in prices reflects just how quickly sentiment has shifted. Both WTI and Brent had climbed more than a dollar in post-settlement trading on Wednesday after the U.S. military launched new strikes on Iranian targets, a move that prompted retaliatory Iranian attacks on Kuwait and Bahrain, the latest and most alarming escalation in a war that many had hoped was winding down.
Washington said the strikes were a direct response to Tuesday’s attack on three cargo vessels transiting the Strait of Hormuz. The timing was especially fraught: the offensive came just hours after President Donald Trump declared that the interim ceasefire with Iran was, in his words, “over.”
Yet even as the region braced for further escalation, Trump offered a note of ambiguity, saying that Iran had called “a while ago,” signaling it wanted to reach a deal, a remark that left traders parsing conflicting signals about whether the conflict was deepening or edging toward resolution.
“Traders are now reassessing the situation, especially as things are very much up in the air regarding oil flows through the Strait of Hormuz,” said Tim Waterer, chief market analyst at KCM Trade.
He noted that the market’s restraint prices falling rather than spiking further stems from lingering hope that diplomacy could still prevail. “The possibility that the next move could be de-escalatory is what’s currently preventing oil from pushing meaningfully higher,” Waterer said.
Sources within the insurance sector said Wednesday that several war-risk underwriters had advised shipping companies to suspend voyages through the Strait of Hormuz altogether, while others were actively reviewing policy terms in light of the renewed vessel attacks a clear signal that the risk of a return to full-scale conflict in the waterway is being taken seriously by those whose business it is to price that risk.
The numbers underline why the Strait of Hormuz commands such outsized attention from traders. Before the war escalated, roughly a fifth of the world’s oil and liquefied natural gas supply passed through the strait.
Tehran’s ability to control or threaten that flow has functioned as its principal source of leverage throughout a conflict that traces its origins back to U.S. and Israeli airstrikes on Iran on February 28.
Before this latest flare-up, oil prices had actually been sliding, as markets worked through pent-up Middle Eastern supply released under the truce, alongside emerging signs of rising global inventories.
The renewed strikes have now scrambled that narrative, injecting fresh geopolitical risk premium back into a market that had begun to price in normalization.
Goldman Sachs, in a note assessing the standoff, characterized the risks to Gulf oil flows and near-term prices as genuinely two-sided. In its base case, the bank expects flows through Hormuz to normalize by the end of July but only if negotiations continue, sanctions waivers on Iranian oil exports are reinstated, and shipping companies receive credible security assurances.
Such a scenario, Goldman noted, would require flows through the strait to rise by as much as 6.6 million barrels per day, a substantial increase reflecting how constrained current throughput has become.
The bank was equally clear about the downside case: failed negotiations, an escalating pattern of tanker attacks, or a U.S. blockade of Iranian oil exports could all further disrupt flows and push the market back toward supply-shock pricing.
Aneeka Gupta, director of macroeconomic research at WisdomTree, offered a similarly balanced read. “In the base case Brent probably trades in a $75–85 range over the next month, with a mild upward bias,” she said.
Gupta argued that the fundamentals remain genuinely mixed: “The underlying supply recovery is real but incomplete; the surplus narrative is discredited for now; and diplomatic engagement, while stalled, hasn’t collapsed entirely.”
The turmoil in the Gulf was not the only supply story rattling energy markets this week. Russia announced a ban on diesel exports on Wednesday, a move aimed at shoring up its domestic fuel market after a wave of Ukrainian drone strikes on refineries triggered fuel shortages and sharp price spikes at home.
While geographically and geopolitically distinct from the Iran crisis, the Russian export ban adds another layer of tightness to global refined products markets already on edge.
For now, oil markets appear to be threading a narrow path, pricing in real escalation risk in the Gulf without yet capitulating to a full war-premium scenario. That balance hinges almost entirely on whether Wednesday’s strikes prove to be a final, containable flashpoint or the opening of a more sustained confrontation.
With the Strait of Hormuz still effectively contested and underwriters already pulling back from covering transit through it, the next moves from both Washington and Tehran, rhetorical and military, are likely to dictate whether Thursday’s pullback in prices holds or proves to be the calm before another spike.
WHAT YOU SHOULD KNOW
Oil prices are being held hostage by one unresolved question: whether the Strait of Hormuz, the passage for a fifth of the world’s oil and gas, stays open or gets choked off.
Fresh U.S. strikes on Iran and Iranian retaliation against Kuwait and Bahrain have injected real escalation risk back into the market, driving insurers to pull back from covering tanker transits through the strait.
Yet prices fell rather than spiked because traders are still betting de-escalation, not war, is the more likely next move. Until that bet is settled one way or the other, expect oil to keep swinging within a wide range (roughly $75–85 for Brent) rather than break decisively in either direction.
