Crude oil prices edged lower on Thursday as investors weighed the risk of supply disruptions from the Middle East following renewed military strikes between the United States and Iran.
Brent crude futures fell 43 cents, or 0.45 per cent, to USD 95.20 a barrel at 0029 GMT. US West Texas Intermediate (WTI) crude futures declined 24 cents, or 0.26 per cent, to USD 90.77 a barrel.
The two benchmarks had recorded sharp swings in the previous session, moving between gains of as much as USD 2 a barrel and losses of about USD 1. Their session highs were the highest since July 24.
The latest decline came as investors assessed US President Donald Trump’s comments that the renewed US military campaign against Iran may not continue for much longer.
US-Iran conflict remains key crude oil trigger
The latest exchange of attacks is the most substantial between the US and Iran since July. The conflict, which began on February 28, has now entered its seventh month.
Trump said on Wednesday that US forces had carried out a “very heavy attack” on Iran, targeting radar and missile systems as well as military equipment near the Strait of Hormuz.
He also said the US had targeted equipment that Iran had attempted to rebuild along the strategic waterway.
Trump said the US had “very strong control” over the Strait of Hormuz and claimed that American forces had removed mines from the waterway. He also said US forces were continuing to bring out boats carrying millions of barrels of oil.
The comments added to uncertainty in the crude market because the Strait of Hormuz is a major route for global oil shipments.
Strait of Hormuz remains in focus
The latest military escalation has increased concerns over the security of oil transportation through the Strait of Hormuz.
Trump said Iranian forces had been trying to rebuild radar and missile systems and capabilities to lay mines in the waterway. He said the US was prepared to carry out further attacks.
The US Central Command said American forces had completed a wave of strikes against Iranian military targets. The targets included air defence sites, radar systems, maritime assets, mine-laying capabilities and communications facilities.
According to CENTCOM, the strikes followed attempted attacks by Iran’s Islamic Revolutionary Guard Corps against commercial shipping in the Strait of Hormuz and against US service members.
Any disruption to commercial shipping through the waterway could affect crude oil supplies and support prices.
Iran retaliates
Iran condemned the latest US strikes and said the attacks violated its sovereignty. Iran’s Ministry of Foreign Affairs said Iranian armed forces had responded with strikes against US military bases that it described as the origin and support points for the American attacks.
The Islamic Revolutionary Guard Corps said it had targeted US bases in Jordan, the United Arab Emirates, Kuwait, Bahrain and Iraq’s Kurdistan region.
The escalation has kept the focus on the potential impact on oil production, exports and shipping from the Middle East.
Trump signals conflict may not last much longer
Despite the latest escalation, Trump said he did not expect the war with Iran to continue for “very much longer”. He said the US campaign would end when the conflict was over and indicated that Washington was prepared to conduct additional attacks if required.
For crude oil investors, the duration and geographical spread of the conflict remain important factors. A prolonged confrontation could increase the risk of disruption to oil production and transportation, while a quick de-escalation could reduce the supply risk premium in crude prices.
