Oil prices declined on Thursday as investors evaluated the latest military developments between the United States and Iran and their potential impact on diplomatic efforts and shipping through the Strait of Hormuz.
Brent crude futures dropped $1.03, or 1.32%, to $76.99 per barrel by 07:49 GMT, while U.S. West Texas Intermediate (WTI) crude fell 88 cents, or 1.2%, to $72.64 per barrel.
Both benchmarks had reached their highest levels since June 22 during Wednesday’s trading.
Geopolitical Tensions Continue to Drive Energy Markets
Oil prices surged after Wednesday’s settlement when the U.S. launched a fresh round of strikes against Iranian targets, prompting retaliatory attacks by Iran on Kuwait and Bahrain and increasing concerns that the conflict could widen.
Washington said the operation followed Tuesday’s attack on three commercial cargo ships in the Strait of Hormuz. The latest military action came shortly after U.S. President Donald Trump announced 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.”
Trump later added that Iran had contacted the United States “a while ago” and was looking to negotiate a new agreement.
Shipping Through Hormuz Remains Under Close Watch
Insurance market sources said several marine insurers have advised shipping companies to delay voyages through the Strait of Hormuz, while others are reviewing policy conditions following renewed attacks on commercial vessels.
Prior to the latest escalation, crude prices had been retreating as traders responded to improving Middle East supply conditions following the ceasefire agreement and evidence of rising inventories.
Around 20% of global oil and liquefied natural gas exports normally pass through the Strait of Hormuz, making the route a critical component of global energy security.
Analysts Outline Possible Scenarios
Goldman Sachs said oil market risks remain balanced.
The bank believes Gulf export flows could return to normal by the end of July if diplomatic negotiations resume, sanctions relief for Iranian oil is restored and shipping companies receive sufficient security guarantees. Such a scenario would require an additional 6.6 million barrels per day to move through the Strait of Hormuz.
However, Goldman warned that renewed attacks on tankers, stalled negotiations or tighter restrictions on Iranian exports could prolong market disruption.
“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.”
Separately, Russia introduced a ban on diesel exports to support domestic fuel supplies following Ukrainian drone attacks that disrupted refinery operations.
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