Summary
Global crude benchmarks eased on Thursday as markets absorbed the uncertainty created by a renewed exchange of fire between the U.S. and Iran, the most substantial since July. Traders weighed the prospect that further military actions could threaten oil flows from the Middle East even as some signs suggested the latest flare-up might be easing.
Market moves
Brent crude futures fell 43 cents, or 0.45%, to $95.2 a barrel at 0029 GMT, while U.S. West Texas Intermediate futures were down 24 cents, or 0.26%, at $90.77. The two benchmarks had swung widely in the previous trading session, at times rising by as much as $2 a barrel and at other times slipping about $1 a barrel, with session highs that were the strongest since July 24.
The retreat came after tentative indications that the latest episode of cross-border strikes had eased - with no confirmed exchange of fire since around midday on Wednesday, Sydney time, according to an analyst note from IG.
Statements from policymakers and analysts
U.S. President Donald Trump said on Wednesday that the renewed U.S. campaign against Iran would not continue for "too long" and that U.S. forces had targeted Iran's radar and missile systems. He added: "We took out all of the new equipment that they tried to build along the Strait of Hormuz - some defensive, some offensive ... It was a very heavy attack last night, and we’re prepared to do another one any time we want."
IG analyst Tony Sycamore noted that the easing was not guaranteed. "If that easing holds, and it is a big if, it won’t be long before oil moving out of the Strait via dark-ship transits and ship-to-ship transfers returns to the levels we saw at the end of last week," Sycamore said.
Shipping and transit data
Preliminary shipping data from Kpler showed four commodity vessels transited the Strait of Hormuz on Wednesday, markedly below the 10-day average of around 13. At the same time, Iran added more ships to the list of vessels it deems non-compliant and subject to fines, confiscation or detention if they attempt to pass through the strait.
The U.S. said on Tuesday that 17 million barrels of oil transited the Strait of Hormuz on Monday, calling it the largest volume of crude to pass through the waterway since the U.S.-Israeli war on Iran began.
Context and implications
The latest exchanges represent the most significant U.S.-Iran fighting since July, and come as the conflict has entered its seventh month. The immediate market response has been a blend of heightened volatility and cautious retracement as traders monitor both on-the-ground developments and shipping activity through a key chokepoint for global oil flows.
Given the limited and evolving nature of the situation, markets appear to be balancing the risk of supply disruption against preliminary signs that the most recent round of hostilities may have abated for now.