Oil drops by more than 7%... Brent futures fall to $89.24

Arabic - Oil prices fell by more than 7 percent, hitting their lowest level since July 21, after the United States and Iran halted military attacks against each other earlier this week, bolstering hopes for a diplomatic resolution that could de-escalate tensions and allow navigation to resume through the Strait of Hormuz.

Brent crude futures dropped $7.54, or 7.79 percent, to $89.24 per barrel, marking the lowest level since July 21, while U.S. West Texas Intermediate crude fell $6.11, or 6.84 percent, to $83.20 per barrel. Brent crude had previously reached $100 per barrel amid the escalation of conflict in the region.

Analysts at ING noted in a client memo: “Oil prices fell sharply in early trading as military tensions between the United States and Iran eased, providing the first tangible signs of a potential de-escalation.” They added, “The movement in oil prices this morning clearly reflects the market’s strong appetite for positive news.”

Despite the halt in attacks, shipping data from Kpler showed that fewer than 10 tankers carrying bulk commodities transited the Strait of Hormuz daily earlier this week.

Some analysts still expect markets to receive support if crude supply continues to be affected by ongoing shipping risks in the Middle East and the war between Russia and Ukraine.

Ole Hansen, an analyst at SEB Research, said: “Oil flows have dropped by about 15 percent from pre-war levels, compared to a normal operating rate of around 20 million barrels per day of crude oil, condensates, and refined products.”

Bashar Al-Halabi, an oil and energy markets analyst at Argus, stated that oil prices do not merely reflect supply and demand realities, but also build a significant portion of their value on geopolitical risk probabilities. He added that markets are watching to see how Iran will behave if any tanker passes through, noting that massive investments by Gulf states and energy-producing countries have enhanced market resilience and helped prevent price spikes from exceeding $150 per barrel.