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US Oil Update: Crude Rebounds as US, Iran Exchange Airstrikes

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Oil prices rose on Thursday as airstrikes between US and Iran diminished hopes of a peace deal, upending the previous session's losses.

Front-month West Texas Intermediate crude futures rose 3% to $91.37 per barrel, while Brent futures gained 2.7% to $96.81/bbl.

According to a Reuters report, the Iranian Revolutionary Guard Corps stated the counterstrike was launched in retaliation for a pre-dawn US air raid that deployed aerial projectiles on the outskirts of Bandar Abbas airport.

The exchange follows confirmation from Washington that US forces had carried out defensive, early-morning strikes near the Strait of Hormuz.

The return to military hostilities erased Wednesday's market optimism, which had previously caused oil prices to plunge 5% on hopes of a diplomatic breakthrough.

The mid-week selloff was originally set off by an Iranian state television broadcast claiming a draft interim peace agreement.

While the broadcasted document indicated that maritime traffic through the vital shipping lane would return to normal within 30 days of signing, market analysts cautioned that finalizing the actual pact could take up to 60 days assuming both nations could reach an agreement at all.

Any remaining market confidence evaporated when US President Donald Trump publicly stated he was unsatisfied with the progress of the three-month conflict's negotiations, warning that critical, unresolved disputes still stand in the way of a settlement.

"Traders have become increasingly cautious about holding long exposure to the oil market ahead of headlines showing progress in ending the conflict," ANZ said.

The ongoing three-month blockade of the Strait of Hormuz continues to fundamentally distort global energy flows.

Data from the Oxford Institute for Energy Studies highlighted that China's crude oil imports fell steeply to 9.3 million barrels per day in April, down from its five-year baseline average of roughly 11 mb/d.

Despite the demand drop in Asia, underlying physical supplies remain exceptionally tight.

The American Petroleum Institute revealed that US crude inventories fell by 2.8 million barrels for the week ended May 22, compounding a massive 9.1-million-barrel draw from the prior week.

The oil market is now awaiting official crude storage data from the US Energy Information Administration to gauge further physical market tightening.

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