Oil prices moved lower on Thursday as traders assessed the consequences of fresh U.S. military strikes on Iran and the potential impact on efforts to revive negotiations and fully reopen the Strait of Hormuz, one of the world’s most important energy shipping routes.
Brent crude futures fell $1.03, or 1.32%, to $76.99 a barrel by 07:49 GMT, while U.S. West Texas Intermediate (WTI) crude declined 88 cents, or 1.2%, to $72.64 a barrel.
Both benchmarks had climbed to their highest levels since 22 June during Wednesday’s trading session.
Renewed Military Action Keeps Markets on Edge
Brent and WTI both gained more than $1 in post-settlement trading on Wednesday after the U.S. military launched another wave of strikes against Iran. Tehran subsequently responded with attacks targeting Kuwait and Bahrain, marking another escalation that threatens efforts to bring the conflict to an end.
Washington said the latest military operation was carried out in response to Tuesday’s attack on three cargo vessels transiting the Strait of Hormuz. The strikes came only hours after U.S. President Donald Trump declared that the interim ceasefire with Iran was “over.”
“Traders are now reassessing the situation, especially as things are very much up in the air regarding oil flows through the Strait of Hormuz,” said Tim Waterer, chief market analyst at KCM Trade.
“The possibility that the next move could be de-escalatory is what’s currently preventing oil from pushing meaningfully higher.”
President Trump later said Iran had contacted the United States “a while ago” and was seeking to negotiate a new agreement.
Strait of Hormuz Remains the Key Risk
According to insurance industry sources, some marine war insurers have advised shipping companies to temporarily suspend voyages through the Strait of Hormuz, while others are reviewing policy conditions after renewed attacks on commercial vessels increased security concerns.
Prior to the latest escalation, oil prices had been easing as markets responded to improving Middle Eastern supply following the ceasefire and indications of rising global inventories.
Before the outbreak of the conflict, approximately one-fifth of global oil and liquefied natural gas shipments passed through the Strait of Hormuz. Iran’s ability to influence traffic through the strategic waterway remains one of its strongest sources of leverage.
Analysts See Wide Range of Possible Outcomes
Goldman Sachs said the outlook for Gulf oil exports and short-term crude prices remains balanced, with risks in both directions.
The bank expects shipping flows to normalise by the end of July if negotiations resume, sanctions waivers on Iranian oil are restored and shipping companies receive sufficient security guarantees. Under that scenario, flows through the Strait of Hormuz would increase by around 6.6 million barrels per day.
However, Goldman also warned that a breakdown in diplomatic efforts, further attacks on tankers or a potential U.S. blockade of Iranian oil exports could significantly disrupt supplies.
“In the base case Brent probably trades in a $75–85 range over the next month, with a mild upward bias,” said Aneeka Gupta, director of macroeconomic research at WisdomTree.
“The underlying supply recovery is real but incomplete, the surplus narrative is discredited for now, and diplomatic engagement (while stalled) hasn’t collapsed entirely.”
Elsewhere, Russia introduced a ban on diesel exports on Wednesday in an effort to stabilise its domestic fuel market after Ukrainian drone attacks on refineries triggered supply shortages and higher prices.