Crude futures retreated in midday trading on Thursday after fresh US-Iran military strikes stoked concerns over the security of the Strait of Hormuz and signaled a potential collapse of the ceasefire between the two countries.
Front-month West Texas Intermediate crude futures retreated by 2.6% to $71.61 per barrel, while Brent futures dropped 2.9% to $75.76/bbl.
Gelber & Associates strategists said WTI crude is trading at $71.74/bbl, down $1.78/bbl and about 2.4% over the day, as the market continues to move sideways to lower while traders separate crude availability from broader fuel market stress.
"Refined products are still flashing tighter conditions, with diesel and gasoline markets carrying more strain than the underlying crude contract as refinery capacity, low product inventories, and Russian fuel disruptions keep margins elevated," Gelber analysts said in a Thursday note.
The UKMTO said that commercial vessel traffic through the Hormuz continued at reduced levels on Wednesday as ship operators maintained a cautious approach following recent attacks on merchant vessels and heightened geopolitical tensions in the region.
The maritime organization said that traffic levels reflected a cautious posture among operators following the three-vessel attack earlier this week.
The latest commercial vessel-tracking data showed a drop-off in Hormuz transits, as renewed attacks on commercial vessels, US retaliatory strikes, and a decline in tanker positioning signal that the strategic waterway remains vulnerable.
Kpler said that recent strong export volumes through the waterway have largely reflected the movement of cargoes delayed during the period of disruption rather than a broad-based recovery in regular shipping activity.
The US attacked Iran for a second day late on Wednesday, and the Islamic Revolution Guards Corps retaliated by striking US military infrastructure in the Middle East, raising fears of a return to war after little progress in efforts to secure a diplomatic outcome.
US Central Command said on Wednesday that about 90 targets were hit overnight, after 80 the previous day, "to further degrade" Iran's ability to attack commercial shipping in the Hormuz.
Iran responded by targeting US bases in Bahrain, Kuwait and Qatar. Jordan also intercepted eight Iran-launched missiles. Iranian Speaker of Parliament Mohammad Bagher Ghalibaf said on Thursday that the US can no longer pursue policies of bullying and reneging on its commitments without facing consequences.
"... Let me put it plainly: if you strike, you'll get hit," Ghalibaf said in a post on X, reiterating that the Strait of Hormuz will only open with "Iranian arrangements."
Going forward, Soojin Kim, research analyst at MUFG, said that the trajectory of the US-Iran conflict, the security of shipping through the Strait and the scale of any disruption to Gulf oil exports will remain the key drivers of oil prices.
Meanwhile, US commercial crude oil inventories increased by 3 million barrels to 411.4 mmbbls in the week ended July 3, the Energy Information Administration said in its weekly report on Wednesday.
Crude inventories are now about 6% below the five-year average for this time of year, the EIA said.