Oil prices fell amid supply risk assessments

Oil prices fell after a three-day rally, as the United States carried out another round of airstrikes on Iran following Tehran’s series of attacks on ships earlier this week. The global benchmark Brent crude traded below $85 a barrel, having risen 12% over the previous three sessions, while West Texas Intermediate (WTI) hovered near $80. The United States completed further airstrikes on Iran, targeting a supertanker near Iran’s main crude export terminal deep in the Persian Gulf. Meanwhile, Iraq suspended oil loading operations at its export hub in Basra after a drone struck a tanker carrying one million barrels of crude, according to a person familiar with the matter.

A wave of Iranian attacks on ships this week has tightened the squeeze on oil shipping through the Strait of Hormuz, which has become one of the key routes used by Gulf producers to deliver crude to global markets. Nevertheless, several ships have already transited the waterway covertly, making it harder to verify changes in shipping traffic. The U.S. Central Command said that the number of ships that passed through the strait on Tuesday night with U.S. support reached double digits.

Crude prices jumped to their highest level in about a month, as escalating conflict revived concerns about supply flows from the energy-rich region, erasing part of a roughly 30% decline in the second quarter. At the same time, near-daily Ukrainian strikes on Russian fuel production facilities and tankers threaten to further disrupt global supplies.

Fatih Birol, executive director of the International Energy Agency, told Bloomberg Television that “markets are worried about whether a quick, lasting resolution to this conflict is possible.” He added, “I hope the crisis is resolved quickly and convincingly; otherwise, the global economy may face some difficulties.”

U.S. President Donald Trump pledged to intensify bombing of Iran until Tehran stops attacking ships in the strait and agrees to open the vital energy chokepoint. The Wall Street Journal reported that Trump is inclined to expand military operations and discussed seizing Kharg Island, which hosts Iran’s main oil export terminal.

Tehran shows no significant signs of backing down. The Islamic Revolutionary Guard Corps said on Wednesday that the strait would remain closed until the United States ends its strikes and blockade of Iranian ports.

Analysts at RBC Capital Markets LLC, including Helima Croft, said the seven-day moving average of oil flows through the strait fell by 4.6 million barrels per day to 3.9 million barrels per day since fighting resumed two weeks ago, reflecting the collapse of a ceasefire, renewed Iranian attacks, and the return of the U.S. blockade. They noted that even if Trump opts for strategic retreat, “we do not see traffic in the Hormuz returning to pre-war levels as long as shipping companies must contend with threats from mines, missiles, drones, and potential fees imposed by Tehran.”

John Woods, chief investment officer and head of Asia investment solutions at Lombard Odier, told Bloomberg Television that markets may adapt to the situation rather than expect a return to normalcy. “What we are likely to see in the near term resembles a quasi-permanent cyclical disruption” in oil flows through the strait, a reality markets will have to accept. He added that Brent crude may embed a permanent price premium of $5 to $15 as the new normal.

In the latest trading, September Brent crude futures fell 0.3% to $85.72 a barrel at 11:06 a.m. London time, while August WTI futures were little changed at $79.56 a barrel.