Brent and WTI futures advanced as the market assessed potential supply disruptions across the Strait of Hormuz.
Brent and WTI maintain their upward trend
Oil prices rose for a fourth consecutive session on Thursday amid escalating tensions between the United States and Iran. The market reacted to a new series of US military operations against Iranian targets and the growing risk to shipping in the Persian Gulf.
In early trading, Brent crude futures for September delivery rose 0.7% to $85.52 a barrel, Meanwhile, West Texas Intermediate futures climbed 0.9% to $80.32 a barrel.
Thus, both indexes were on track to complete four consecutive days of gains, at the start of the week, they rose by nearly 10%, reaching their highest levels in a month following the escalation of hostilities.
However, the session showed some volatility after the initial advance, with traders adjusting positions as they analyzed the scope of the military operations and the possibility of new avenues for negotiation opening up between the parties.
The Strait of Hormuz is the focus of market attention
On the other hand, the main focus of concern remains the Strait of Hormuz; this waterway connects the Persian Gulf with the Arabian Sea and is one of the most important energy routes in the world.
Approximately one-fifth of the world’s oil and liquefied natural gas trade passes through this maritime route. For this reason, any prolonged reduction in traffic could affect regional exports and increase shipping and marine insurance costs.
The renewed pressure on oil prices came after the United States struck Iranian military targets linked to threats against commercial vessels. Washington indicated that the operations were aimed at reducing Iran’s ability to interfere with shipping in the Gulf.
Tehran, in turn, warned that regional energy exports could face further disruptions if the attacks continue. These statements increased the geopolitical risk premium already factored into Brent and WTI crude oil prices.
The conflict increases the risk to supply
In this context, market participants are watching both the duration of the escalation and its potential spread to other routes. Further deterioration could limit tanker traffic and affect shipments from several Gulf producers.
Likewise, the market is closely monitoring the Bab el-Mandeb crossing between the Red Sea and the Gulf of Aden; a simultaneous disruption on both routes would increase pressure on logistics chains and force the use of longer routes.
For now, the central scenario remains marked by uncertainty. A decrease in tensions could reduce some of the geopolitical premium and trigger a price correction. Conversely, a prolonged supply disruption could support crude oil gains over the next few weeks.
Crude oil reserves support prices
In addition, inventory data in the United States provided further support to the oil market, with the Energy Information Administration reporting that commercial crude oil inventories fell by 1.7 million barrels during the week ending July 10.
Gasoline inventories also fell by 1.5 million barrels due to strong demand associated with the summer driving season. This inventory trend suggests that fuel consumption remains relatively robust in the world’s largest oil market.
In contrast, distillate stocks unexpectedly increased by 4.6 million barrels; this segment includes products such as diesel and heating oil, so the increase partially moderated the bullish signal coming from other inventories.
The outlook depends on the flows through Hormuz
Ultimately, the evolution of oil prices will depend on the security of shipments and the ability of producers to maintain their exports. Traders will also be monitoring decisions by major consumer economies and any potential releases of strategic reserves.
The International Energy Agency indicated that flows through the Strait of Hormuz had shown a partial recovery during June. However, the renewed hostilities further deteriorated the outlook and added uncertainty about the future balance between supply and demand.
Until there is a clear sign of easing tensions, Brent and WTI will remain subject to sharp fluctuations, the market has physical supply, but the risk to a major artery that carries a significant portion of the world’s energy keeps oil prices under upward pressure.
Source: Es.investing
Photo: Shutterstock
