Oil prices rose as the military escalation increased the risk of supply disruptions from the Middle East, oil prices were on track for their best week in months due to escalating hostilities between the United States and Iran. The market priced in a higher risk premium amid concerns about potential damage to energy infrastructure and renewed restrictions on maritime traffic.
During the trading day, Brent crude futures rose to around $84 per barrel, while West Texas Intermediate remained near $79. Both contracts had accumulated weekly gains of over 10%.
The movement reflected fears that the confrontation could affect regional production or the routes used to export oil and fuels. Even so, intraday fluctuations were moderate compared to the strong gains accumulated during the week.
Brent and WTI react to the military escalation
First, the resumption of attacks between the United States and Iran boosted oil contract purchases, military operations hit strategic infrastructure and increased uncertainty about the duration of the conflict.
The United States reported new attacks targeting Iranian military capabilities; Iran responded with operations against facilities linked to US interests in the Middle East.
This scenario diminished expectations of an immediate understanding, and operators began to assess whether the confrontation could affect oil facilities, export terminals, or shipping routes.
The Strait of Hormuz is the focus of market attention
On the other hand, the Strait of Hormuz once again took center stage in energy analysis, as nearly a fifth of the world’s traded oil and fuels pass through this waterway.
A prolonged disruption would have direct effects on crude oil flows from Gulf producers, it could also raise transportation, marine insurance, and fuel costs in various markets.
Vessel traffic showed signs of slowing down amid military operations; likewise, operators closely monitored the ability of other producers to compensate for any regional shortfalls.
US inventories support oil prices
In addition to geopolitical risk, US inventory data provided further support to prices, the Energy Information Administration reported a 1.7 million barrel drop in commercial crude oil inventories for the week ending July 10. Stocks stood at 409.7 million barrels.
Gasoline inventories also fell by 1.5 million barrels; these figures suggest strong demand during the peak travel season in the United States.
Previously, the American Petroleum Institute had estimated a decrease of approximately 564,000 barrels, although the reduction was less than some analysts had predicted, it confirmed a downward trend in inventories.
The market assesses the duration of the geopolitical risk
Meanwhile, Qatar, Egypt, and Pakistan maintained diplomatic efforts to contain the escalation; however, the distance between Washington and Tehran reduced expectations of a quick solution.
Future oil market movements will depend on the security of shipping lanes and the extent of military operations. The response of major producers and the evolution of commercial reserves will also be relevant.
For now, Brent and WTI maintain an upward weekly trajectory; the market will remain sensitive to any signs of damage to energy facilities or restrictions in the Strait of Hormuz.
Source: Reuters
Photo: Shutterstock
