Oil prices stabilize amid assessment of US-Iran conflict developments

Oil prices stabilized during a volatile trading session today as traders assessed the escalating conflict between the United States and Iran and its potential to disrupt oil supplies. Brent crude futures rose 26 cents, or 0.29 percent, to $91 per barrel, after earlier touching $89.02. US West Texas Intermediate (WTI) crude fell 17 cents, or 0.20 percent, to $84.29 per barrel, after hitting an intraday low of $83.21. Kuwaiti crude oil rose by $1.93 to reach $85 per barrel in yesterday’s trading, compared to $83.07 on Tuesday, according to the Kuwait Petroleum Corporation.

Geopolitical tensions continued to simmer after the US military announced it had struck dozens of targets belonging to Iran’s Islamic Revolutionary Guard Corps (IRGC), including military command centers and drone facilities, in a two-hour operation carried out by Washington following Tehran’s launch of ballistic missiles at US forces in the Middle East. Tim Waterer, chief market analyst at KCM Trade, said, “As long as safe passage through the Strait of Hormuz is not guaranteed, the risk premium in oil prices will not dissipate. Diplomatic efforts are welcome, but the market is reflecting the reality of ongoing strikes.”

Waterer added, “Although crude oil continues to flow through alternative routes, navigation through the strait remains a significant risk at best... Safe passage is far from assured as combat operations continue.”

Analysts noted that investors are focusing on the volume of oil flowing through key transit corridors and the prospects for a diplomatic breakthrough. The Iranian news agency Fars reported that a Qatari liquefied natural gas (LNG) tanker sailed through the route designated by Iran with official permission. According to data from Kpler and the London Metal Exchange, the tanker departed the Strait of Hormuz during the night of July 29. It had loaded its cargo at Qatar’s Ras Laffan port between the 4th and 6th of this month. The conflict has also disrupted shipping through the Bab el-Mandeb Strait, creating a second pressure point on global oil flows alongside Hormuz. Two sources and shipping data indicated that tankers scheduled to load oil at the Caspian Sea Pipeline Union terminal were sailing away from the Black Sea after a vessel was targeted during loading operations at the terminal today, dealing another blow to supplies. Hamad Hussein, an analyst at Capital Economics, wrote in a note: “Given disruptions to flows through multiple corridors, as well as the rapid drawdown of oil inventories, prices could rise to levels higher than current ones.”