Crude oil futures settled lower in after-hours trading on Thursday but remained near their highest levels in over a month as the US-Iran conflict escalated, with Washington intensifying its strikes, hitting targets further north of the country.
Front-month West Texas Intermediate crude futures slipped 0.7% to $79.07 per barrel, while Brent futures retreated 0.8% to $84.29/bbl.
Soojin Kim, research analyst at MUFG, said the US carried out another round of airstrikes and disabled an empty tanker bound for an Iranian port, while Iran maintained that the Strait of Hormuz would remain closed.
US commercial crude oil inventories decreased by 1.7 million barrels to 409.7 mmbbls in the week ended July 10, the Energy Information Administration said in its weekly report on Wednesday, less than Investing.com's forecast of a 1.8-mmbbl draw.
Crude inventories are now about 6% below the five-year average for this time of year, the agency said.
The US Central Command launched its fifth straight day of attacks on Iran on Thursday, following up on the previous night's attacks that hit an oil tanker near Iran's main export terminal.
Gelber & Associates strategists said oil markets have absorbed the geopolitical premium tied to US strikes and the heightened naval presence around the Strait of Hormuz, with no confirmed disruption to physical oil flows preventing prices from rising meaningfully.
Confirmed crude and condensate flows through Hormuz fell 62% to about 4.1 million barrels per day, while regional oil loadings declined 47%, according to Kpler's X post on Thursday.
Though some cargoes continue to move, Kpler said the Strait remains operational but under severe restrictions, with shipping companies limiting exposure to elevated risks.
Meanwhile, Iran warned that it would "crush" key targets in the Middle East if President Trump's threats to target the country's infrastructure in the coming days are carried out.
Ebrahim Zolfaqari, spokesperson for Iran's military command, said infrastructure in the Gulf region that has remained untouched so far would be "smashed under the iron blows" of Iran's armed forces if the US carries out attacks on Iranian infrastructure.
Iran also asked Yemen's Houthi rebels to stand ready to close the Red Sea oil route if the US strikes Iranian power infrastructure, according to media reports, which would further threaten global energy supplies.
RBC Capital Markets strategists said a potential new front in the Red Sea is compounding geopolitical tensions. Saudi Arabia has increased crude exports via its East-West Pipeline and the Yanbu terminal to around 4 million b/d to offset reduced flows through the Strait of Hormuz, making the Red Sea a critical alternative export route.
RBC said any renewed Houthi attacks on shipping or Saudi energy infrastructure could threaten that capacity and significantly worsen supply risks.