Oil prices pulled back on Thursday after posting their biggest gains in weeks, as investors shifted their attention from rising military tensions in the Gulf to the continued flow of crude supplies from the region.
Brent crude futures dropped 96 cents, or 1.06 percent, to $89.78 a barrel by 0418 GMT. US West Texas Intermediate (WTI) crude also fell 64 cents, or 0.76 percent, to $83.82 a barrel.
The decline followed a sharp rally in the previous session, when Brent jumped nearly 8 percent and WTI gained more than 6 percent. The surge came after US President Donald Trump warned that Iran would be hit “very hard” following an Iranian missile attack on a US military base in Jordan.
Military activity in the region intensified on Wednesday. The United States and Saudi Arabia launched strikes against Iran backed paramilitary groups in Iraq in response to drone attacks on Saudi oil facilities that were launched from Iraqi territory. It was the first time Saudi Arabia had openly joined US air strikes.
The US also carried out two hours of attacks on Iran later the same day, ending a brief pause in military operations that had lasted since the weekend.
Despite the growing conflict, traders appeared less concerned about immediate supply disruptions and instead focused on the fact that oil continues to leave the Gulf through alternative routes.
Lin Ye, Vice President for Oil Commodity Markets at Rystad Energy, said the market had already absorbed the impact of Trump’s latest warning and was now weighing the possibility that tensions may not escalate as much as initially feared.
According to Ye, recent trading has followed a familiar pattern. Geopolitical headlines have sparked sudden jumps in oil prices, but those gains have faded as markets reassessed actual supply conditions and monitored ongoing diplomatic efforts.
Although Iran closed the Strait of Hormuz after the US-Israeli war began on February 28, crude exports from the Gulf have not come to a complete halt. The waterway previously handled about one fifth of the world’s oil and gas shipments.
Rystad Energy estimates that around 13 million barrels of oil a day are still reaching global markets from the Gulf.
Oil exports have also continued despite disruption in the Red Sea. Since Iran aligned Houthi forces in Yemen imposed a naval blockade on Saudi Arabia on July 20, shipping through the Bab el-Mandeb Strait has slowed. However, some cargoes, particularly those carried by tankers linked to China, are still making their way to buyers.
Tony Sycamore, a market analyst at IG, said oil continues to find alternative paths out of the region despite lower overall export volumes.
He added that the longer the current situation continues, the more effective these alternative routes are likely to become, reducing Iran’s ability to use the Strait of Hormuz as leverage over global energy markets.
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